Exchange rate fluctuations and international portfolio rebalancing

Gyntelberg, Jacob; Loretan, Mico; Subhanij, Tientip; Chan, Eric

doi:10.1016/j.ememar.2013.11.004

Cited by 15 publications

(12 citation statements)

References 8 publications

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“…(Hau and Rey, 2006) also point out that evidence from U.S. global mutual funds indicate that foreign exchange risk in international equity portfolios is mostly un-hedged. (Gyntelberg et al, 2014) also support evidence of imperfect hedging in Thailand stock market. movements, and (iii) literature on international fund flows.…”

Section: Literature Reviewmentioning

confidence: 60%

“…In the meantime, foreign investors will buy or sell domestic currencies, which leads to exchange rate appreciation or depreciation. Afterwards, Gyntelberg et al (2014) give some empirical support for this framework. Employing a daily frequency dataset for Thailand during 2005 to 2006, they investigate the interaction between exchange rate fluctuations and returns on risky financial assets.…”

Section: Literature Reviewmentioning

confidence: 99%

“…The role of international capital flows in the exchange rate dynamics gets a broad-based interest due to their significant increase during the past few decades. Their relationship also affects the stability of the financial system as well as broader economic developments and conditions (Gyntelberg et al, 2014).…”

Section: Introductionmentioning

confidence: 99%

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Dynamic interactions between real exchange rate and international fund flows in China

Yang¹,

Li²

2017

Afr. J. Bus. Manage.

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As the progress of capital account liberalization in China, the volume and volatility of international fund flows has increased significantly since 2000. Therefore, it is of vital importance to investigate their influence on domestic financial market. Based on a novel database, EPFR Global, we get the monthly fund flows in China from January 2005 to June 2013. Vector autoregression (VAR) models are employed to investigate the dynamic relationships between real exchange rate and international fund flows.The following conclusions can be drawn: (i) large amount of international fund investments tend to result in RMB appreciation; (ii) the appreciation of real effective exchange rate leads to the decrease of fund flows in the first month and attracts more fund investments afterwards; (iii) the interaction between equity flows and exchange rate is more significant than bond flows.

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Section: Literature Reviewmentioning

confidence: 60%

Section: Literature Reviewmentioning

confidence: 99%

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Dynamic interactions between real exchange rate and international fund flows in China

Yang¹,

Li²

2017

Afr. J. Bus. Manage.

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“…Explaining exchange rate dynamics has been an important issue in international finance since the breakdown of the Bretton Woods System (De Grauwe and Dewachter 1993;Williamson 2009;An and Wang 2012;Balke et al 2013;Tang and Zhou 2013). Due to their significant increase during the past few decades, the role of international capital flows in exchange rate dynamics received considerable attention in this line of literature (see, for instance, Brooks et al 2004;Calvo et al 1993;Caporale et al 2015;Combes et al 2012;Jongwanich and Kohpaiboon 2013;Gyntelberg et al 2014;Kosteletou and Liargovas 2000). 1 There is evidence that large capital inflows lead to real exchange rate appreciation, but not all types of capital flows may have the same effects (Combes et al 2012).…”

Section: Introductionmentioning

confidence: 99%

Are International Fund Flows Related to Exchange Rate Dynamics?

Haan

Scholtens

2017

Open Econ Rev

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Employing monthly data for 53 countries between 1996 and 2015, we investigate the relationship between international fund flows and exchange rate dynamics. We find strong co-movement between funds flows (as measured with the EPFR Global data base) and bilateral real exchange rates vis-à-vis the USD. This holds both for equity flows and bond flows. However, bond flows have a more significant relationship with RER appreciation than equity flows in developing countries, while in developed countries equity flows play a more important role. Under a more flexible exchange rate regime the real exchange rate appreciation associated with fund flows is higher.

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“…Third, the empirical patterns of international equity returns, equity portfolio flows, and exchange rate returns shown in Hau and Rey (2004) have motivated other studies to consider the dynamics of alternative assets and capital flows. For example, Gyntelberg et al (2014) use daily data on FX transactions and equity flows for Thailand to provide evidence that portfolio rebalancing is an important determinant of exchange rates. Using the same empirical approach as Hau and Rey (2004) and data on equity portfolio flows into emerging market-dedicated mutual funds, Ehlers and Takáts (2013) similarly find that evidence in favor of portfolio rebalancing for equity investment in emerging markets.…”

Section: Introductionmentioning

confidence: 99%

Portfolio Rebalancing in Times of Stress

Fischer

Greminger

Grisse

et al. 2017

gwp

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This paper investigates time variation in the dynamics of international portfolio equity flows. We extend the empirical model of Hau and Rey (2004) by embedding a two-state Markov regime-switching model into the structural VAR. The model is estimated using monthly data, 1995-2015, on equity returns, exchange rate returns and equity flows between the United States and advanced and emerging economies. We find that the data are consistent with portfolio rebalancing. The estimated states match periods of low and high financial stress. Our main result is that for equity flows between the United States and emerging markets, the rebalancing dynamics differ between episodes of high and low levels of financial stress. A switch from the low to the high-stress regime is associated with capital outflows from emerging markets. Once in the high stress regime, the response of capital flows to exchange rate shocks is smaller than in normal (low stress) periods.

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Exchange rate fluctuations and international portfolio rebalancing

Cited by 15 publications

References 8 publications

Dynamic interactions between real exchange rate and international fund flows in China

Dynamic interactions between real exchange rate and international fund flows in China

Are International Fund Flows Related to Exchange Rate Dynamics?

Portfolio Rebalancing in Times of Stress

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