This increases importantly the cross-sectional coverage of our final dataset. MS reports country weights in only 52 countries and does not contain data on cash allocations.<sup>9</sup> The combination of the two databases provides us with an extensive cross-sectional and timeseries coverage of funds. MS contains a large number of funds after 2007 but very few in earlier years, while EPFR has a more balanced number of funds dating back to 1996.<sup>10</sup> In addition, we use stock and bond market country indexes from J.P. Morgan and MSCI to compute the country returns, , which we impute to each fund’s investment in each country (we do not have information on the actual returns of each fund in each country). We obtained this information from Datastream and MSCI.

In addition to our data on fund country weights, we also use data on the country benchmark weights and returns of several major benchmark indexes ( ). We obtain these data directly from FTSE, J.P. Morgan, and MSCI through bilateral agreements, and indirectly through MS for indexes produced by Dow Jones, Euro Stoxx, and S&P. For each of the benchmark indexes in MS and MSCI, we collect data on price returns, gross returns, and net returns. Appendix Table 1 presents a detailed list of the benchmarks indexes included in our data. We rely heavily on the MSCI benchmark indexes because 86 percent of our data on equity mutual funds declare to follow them.<sup>11</sup> To match the data on international mutual funds with the benchmark indexes, we assign to each fund the index declared in its prospectus. For funds with no declared index, we impute the benchmark assigned to it by industry analysts, as reported by MS.<sup>12</sup> We were able to match 88 percent of the equity funds and 18 percent of the bond funds in our database. The reduced matching of bond funds with their benchmarks is not because of matching problems but for lack of information on the detailed portfolio composition of their benchmark indexes.<sup>13,14</sup> We do not use the rest of the funds because it is not clear whether the missing information is due to the fund not following a

> 9 In our estimations, we only use country allocations and, thus, do not include the residual category of other countries nor cash.

> 10 In our consolidated database we kept the country coverage of MS (52 countries) and adapted the EPFR database to this format, lumping countries outside these 52 in a residual category called “other equity” (also present in MS). We have also performed robustness tests for the impact of this change for the EPFR database. The results are qualitatively similar.

> 11 Some funds follow a linear combination of two or more indexes. We use that combination as their benchmark.

> 12 Results are qualitatively similar when excluding these funds.

> 13 Most bond funds follow J.P. Morgan bond indexes. However, within this family we could only get access to the detailed composition of the EMBI+, EMBI+ Global, and EMBI+ Global Diversified.

> 14 There is no agreement in the literature on how to assign benchmarks. To different degrees, papers use the declared benchmark, the one assigned by analysts, and the one that yields the smallest deviation from the fund portfolio (Cremers and Petajisto, 2009; Sensoy, 2009; Cremers et al., 2013; Jiang et al., 2013; Busse et al., 2014).

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