Camanho, N, Hau, H and Rey, H (2022) Global Portfolio Rebalancing and Exchange Rates. Review of Financial Studies, 35 (11). pp. 5228-5274. ISSN 0893-9454
Abstract
We examine international equity allocations at the fund level and show how excess foreign returns influence portfolio rebalancing, capital flows, and currencies. Our equilibrium model of incomplete foreign exchange (FX) risk trading where exchange rate risk partially segments international equity markets is consistent with the observed dynamics of equity returns, exchange rates, and fund-level capital flows. We document that rebalancing is more intense under higher FX volatility and find heterogeneous rebalancing behavior across different fund characteristics. A granular instrumental variable approach identifies a positive currency supply elasticity.
More Details
Item Type: | Article |
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Subject Areas: | Economics |
Additional Information: |
© The Author(s) 2022. Published by Oxford University Press on behalf of The Society for Financial Studies.
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Date Deposited: | 28 Apr 2022 16:16 |
Date of first compliant deposit: | 28 Apr 2022 |
Subjects: |
Financial markets Investment funds Investment appraisal Foreign exchange markets |
Last Modified: | 21 Nov 2024 02:52 |
URI: | https://lbsresearch.london.edu/id/eprint/2338 |