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on Financial Markets |
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Issue of 2018‒04‒23
four papers chosen by |
| By: | KANAMURA Takashi |
| Abstract: | This paper examines the portfolio diversification effect of commodity futures on financial market products introducing a comprehensive evaluation standard of risk standardization, robustly small correlations, and risk-return tradeoffs. Regarding risk standardization, we propose a definition of portfolio diversification as how much the distribution of portfolio returns is close to a normal distribution. It is shown by using α-stable distribution that if the commodity price return distribution has the opposite sign of skewness parameter β to financial portfolio's β, commodity diversification effect exists. The empirical studies using S&P500, U.S. 10-year bond and DJ-AIG commodity index are conducted to investigate the portfolio diversification effects. The parameter estimation results of portfolio return distributions, the conditional correlations using the dynamic conditional correlation model with financial exogenous variables, and the efficient frontier from the mean-CVaR portfolio optimization all suggest that commodity futures have a diversification effect on financial markets. |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:18019&r=fmk |
| By: | Kei-Ichiro Inaba (Bank of Japan) |
| Abstract: | This article analyses global stock return comovements for 37 advanced and emerging countries over the period 1996-2015. The article reports that the comovements were greater in advanced countries than in emerging ones, but increased more rapidly in emerging countries than in advanced ones. Such comovements had upward and downward trends in 23 and 7 of the sample countries, respectively. The driving forces behind these comovements were country fixed effects and country-specific time-varying factors. These factors include the increasing openness of international trade and finance, business climate, and institutional opaqueness, which latter two worked in line with an information-driven comovement theory. The time-varying factors also include indicators representing monetary policy and capital controls, supporting a policy implication of a global financial cycle hypothesis: a monetary policy dilemma. |
| Keywords: | Financial globalisation; International portofolio diversification; Stock market comovements; Information-driven comovements; Global financial cycle |
| JEL: | F3 G1 O1 |
| Date: | 2018–04–11 |
| URL: | http://d.repec.org/n?u=RePEc:boj:bojwps:wp18e07&r=fmk |
| By: | Nathan Converse; Eduardo Levy-Yeyati; Tomas Williams |
| Abstract: | Since the early 2000s exchange-traded funds (ETFs) have grown to become an important investment vehicle worldwide. In this paper, we study how their growth affects the sensitivity of international capital flows to the global financial cycle. We combine comprehensive fund level data on investor flows with a novel identification strategy that controls for unobservable time-varying economic conditions at the investment destination. For dedicated emerging market funds, we find that the sensitivity of investor flows to global risk factors for equity (bond) ETFs is 1.5 (1.25) times higher than for equity (bond) mutual funds. In turn, we show that in countries where ETFs hold a larger share of financial assets, total cross-border equity flows and prices are significantly more sensitive to global risk factors. We conclude that the growing role of ETFs as a channel for international capital flows amplifies the incidence of the global financial cycle in emerging markets. |
| Keywords: | Exchange-traded funds, mutual funds, global financial cycle, global risk, push and pullfactors, capital flows, emerging markets |
| JEL: | F32 G11 G15 G23 |
| Date: | 2018–04–09 |
| URL: | http://d.repec.org/n?u=RePEc:col:000518:016200&r=fmk |
| By: | Yi Huang (IHEID, Graduate Institute of International and Development Studies, Geneva); Ugo Panizza (IHEID, Graduate Institute of International and Development Studies, Geneva and CEPR); Richard Portes (London Business School, CEPR and NBER) |
| Abstract: | This paper uses firm-level data to document and analyze international bond issuance by Chinese non-financial corporations and the use of the proceeds of issuance. We find that dollar issuance is positively correlated with the differential between domestic and foreign interest rates. This interest rate differential increases the likelihood of dollar bond issuance by risky rms and decreases the likelihood of dollar bond issuance of exporters and profitable firms. Moreover, and most strikingly, we find that risky firms do more inter-firm lending than non-risky firms and that this lending rose significantly after the regulatory shock of 2008-09, when the authorities sought to restrict the financial activities of risky firms. Risky firms try to boost profitability by engaging in speculative activities that mimic the behavior of financial institutions while escaping prudential regulation that limits risk-taking by financial firms. |
| Keywords: | China, bond markets in emerging markets, carry trade, shadow banking |
| JEL: | F34 F32 G15 G30 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heidwp06-2018&r=fmk |