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on International Finance |
| By: | Patrick Aldridge; Jabir Sandhu; Sofia Tchamova |
| Abstract: | We find that foreign central banks own a large share of Government of Canada (GoC) bonds and tend to hold their positions for longer than other types of asset managers. This buy-and-hold behaviour could offer benefits. For example, foreign central banks may be less likely than other asset managers to sell bonds and add to strains on market liquidity in periods of turmoil. However, foreign central banks’ buy-and-hold behaviour combined with their minimal lending of GoC bonds in securities-financing markets, as observed in our available data, can potentially lower liquidity because fewer GoC bonds are available for others to transact in secondary markets. Indeed, we find that higher levels of foreign central banks’ GoC bond holdings are related to lower liquidity. |
| Keywords: | Exchange rates; Financial institutions; Financial markets, Financial stability; Foreign reserves management; International financial markets; Market structure and pricing |
| JEL: | E5 E58 F3 F30 F31 G0 G01 G1 G11 G12 G15 G2 G23 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:bca:bocsan:24-26 |
| By: | Leonie Bräuer (University of Geneva; Swiss Finance Institute, Students); Harald Hau (University of Geneva) |
| Abstract: | Using comprehensive new contract level data (EMIR) for the period 2019-2023, we explore how the FX derivative trading by European funds compares to a feasible theoretical benchmark of optimal hedging. We find that hedging behavior by all fund types is often partial, unitary (i.e., with a single currency focus), and sub-optimal. Overall, the observed FX derivative trading does not significantly reduce the return risk of the average European investment funds, even though optimal hedging strategies could do so without incurring substantial trading costs. |
| Keywords: | Global Currency Hedging, Institutional Investors, Mean-Variance Optimization |
| JEL: | E44 F31 F32 G11 G15 G23 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:chf:rpseri:rp24103 |
| By: | Anusha Chari; Karlye Dilts Stedman; Christian T. Lundblad |
| Abstract: | A new, high frequency measure of investor sentiment outperforms similar measures in forecasting investment activity in emerging markets. |
| Keywords: | risk-on/risk-off; global investor risk aversion; extreme events; tail risk; portfolio reallocation; return predictability |
| JEL: | F21 F36 F65 G11 G12 G15 G23 |
| Date: | 2024–11–26 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedkrw:99293 |