gwp 2017
DOI: 10.24149/gwp322
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Portfolio Rebalancing in Times of Stress

Abstract: 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 h… Show more

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Cited by 1 publication
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References 24 publications
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“…Bams, Schotman & Tyagi (2016) state that pension funds actively rebalance their portfolio to counteract the impact of return on their portfolios significantly more than the rebalancing estimated for households. Fischer et al (2021) posits that when price shocks cause the portfolio weights to deviate from their optimal risk-return maximizing values, investors rebalance their portfolios. Huss & Maloney (2017) aver that well-managed dynamic rebalancing processes may lead to more predictable risk characteristics, while seemingly passive buy-and-hold portfolios may have the most variable and least predictable risk outcomes.…”
Section: Statement Of the Problemmentioning
confidence: 99%
“…Bams, Schotman & Tyagi (2016) state that pension funds actively rebalance their portfolio to counteract the impact of return on their portfolios significantly more than the rebalancing estimated for households. Fischer et al (2021) posits that when price shocks cause the portfolio weights to deviate from their optimal risk-return maximizing values, investors rebalance their portfolios. Huss & Maloney (2017) aver that well-managed dynamic rebalancing processes may lead to more predictable risk characteristics, while seemingly passive buy-and-hold portfolios may have the most variable and least predictable risk outcomes.…”
Section: Statement Of the Problemmentioning
confidence: 99%