Country And Currency Risk Premia In An Emerging Market
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Country And Currency Risk Premia In An Emerging Market
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Author : Ian Domowitz
language : en
Publisher:
Release Date : 1999
Country And Currency Risk Premia In An Emerging Market written by Ian Domowitz and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1999 with categories.
The magnitude and determinants of credit and currency risks are topics of considerable importance. This paper uses data on peso- and dollar-denominated debt issued by the Mexican government to identify currency and country risk premia. We show that shoc ks in equity and debt market returns translate into long-term increases in the premium demanded by investors with respect to currency and country factors. Country and currency premia help explain equity returns and closed-end fund discounts. Additional evidence is provided showing that investors did not anticipate the magnitude or timing of the currency devaluation of December 1994 and the subsequent financial crisis.
Identification And Testing Of A Term Structure Relationship For Country And Currency Risk Premia In An Emerging Market
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Author : Ian Domowitz
language : en
Publisher:
Release Date : 2008
Identification And Testing Of A Term Structure Relationship For Country And Currency Risk Premia In An Emerging Market written by Ian Domowitz and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with categories.
This paper uses a term structure of Mexican sovereign debt to create measures of country and currency risk premia. We use these measures to test hypothesis about investors' expectations regarding these risks and their relationship to volatility in securities markets. In the period 1993-94, the behavior of these two risk premia are markedly different. Interestingly, the currency premium is considerably larger and more volatile than its country risk counterpart. We find that increases in stock return volatility translate into increases in the premium demanded by investors with respect to currency and country factors. Investors appear to have long memories, in that the premia are more persistent than equity market volatility shocks.
Currency Risk Premia And Unhedged Foreign Currency Borrowing In Emerging Markets
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Author : Sajjid Z. Chinoy
language : en
Publisher:
Release Date : 2001
Currency Risk Premia And Unhedged Foreign Currency Borrowing In Emerging Markets written by Sajjid Z. Chinoy and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2001 with Corporations categories.
Currency Risk Premia In Global Stock Markets
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Author : Shaun K. Roache
language : en
Publisher: International Monetary Fund
Release Date : 2006-08
Currency Risk Premia In Global Stock Markets written by Shaun K. Roache and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006-08 with Business & Economics categories.
Large fundamental imbalances persist in the global economy, with potential exchange rate implications. This paper assesses whether exchange rate risk is priced across G-7 stock markets. Given the multitude of hedging instruments available, theory suggests that stock market investors should not be compensated for currency risk. However, data covering 33 industry portfolios across seven major stock markets suggest that not only is exchange rate risk priced in many markets, but that it is time-varying and sensitive to currency-specific shocks. With stock market investors typically exhibiting "home bias," this suggests that investors are using equity asset proxies to hedge the exchange rate risks to consumption.
Local Currency Bond Risk Premia
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Author : Oguzhan Cepni
language : en
Publisher:
Release Date : 2019
Local Currency Bond Risk Premia written by Oguzhan Cepni and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
This paper investigates the source of variation in emerging market (EM) local currency bond risk premium by employing panel fixed effects regression model. Moreover, we use the methodology of dynamic factor model for large datasets to investigate the possible linkages between excess bond return and economic activity. We provide evidence that macroeconomic and financial variables contain valuable information in explaining local currency bond excess returns. Additionally, we extend our analysis with a panel threshold estimation to investigate how the influence of different factors may vary in different states of the markets depending on the level of global risk appetite. The results show that investors pay more attention to changes in macroeconomic fundamentals when the global risk aversion is high. Also, the influence of exchange rate volatility is more pronounced during the time of market stress. On the other hand, positive credit rating changes decrease the country risk premium which results in lower bond risk premium in tranquil times. Overall, these findings imply that global investors view the local currency debt market as a separate asset class and explore potential diversification benefit from investing in emerging markets by differentiating meaningfully in terms of macroeconomic and financial fundamentals.
Inflation Targeting And Country Risk
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Author : Mr.Armand Fouejieu
language : en
Publisher: International Monetary Fund
Release Date : 2013-01-23
Inflation Targeting And Country Risk written by Mr.Armand Fouejieu and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-01-23 with Business & Economics categories.
The sovereign debt crisis in Europe has highlighted the role of country risk premia as a link between countries’ fiscal and external balances, financial conditions and monetary policy. The purpose of this paper is to estimate how adoption of inflation targeting (IT) affects spreads. It is hypothesized that country risk premia for IT countries (especially among emerging market economies) may be lower than for other countries owing to greater policy predictability and more stable long-term inflation. The findings suggest that IT reduces the risk premium, both through adoption of the IT regime, and through the observed track record in stabilizing inflation.
Systematic Intervention And Currency Risk Premia
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Author : Marcel Fratzscher
language : en
Publisher:
Release Date : 2021
Systematic Intervention And Currency Risk Premia written by Marcel Fratzscher and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021 with categories.
Systematic Intervention And Currency Risk Premia
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Author : Marcel Fratzscher
language : en
Publisher:
Release Date : 2019
Systematic Intervention And Currency Risk Premia written by Marcel Fratzscher and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
Using data for the trades of 19 central banks intervening in currency markets, we show that stabilization policies by individual central banks lead to "systematic intervention" patterns. This systematic intervention is driven by and impacts on the same factors that drive currency excess returns: carry, momentum, value, and a dollar factor. The sensitivity of an individual central bank's intervention to these factors differs markedly across countries, with developed countries making a profit from intervention and emerging markets incurring large losses.
Monetary Rules For Emerging Market Economies
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Author : Fabio Ghironi
language : en
Publisher: International Monetary Fund
Release Date : 2002-02
Monetary Rules For Emerging Market Economies written by Fabio Ghironi and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002-02 with Business & Economics categories.
We compare the performance of a currency board, inflation targeting, and dollarization in a small, open developing economy with a liberalized capital account. We focus on the transmission of shocks to currency and country risk premia and on the role of fluctuations in premia in the propagation of other shocks. We calibrate our model on Argentina. The framework matches the second moments of key variables well. Welfare analysis suggests that dollarization is preferable to alternative regimes because it removes currency premium volatility. However, a currency board can match dollarization on welfare grounds if the central bank holds a sufficiently large stock of foreign reserves.
Was The Classical Gold Standard Credible On The Periphery
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Author : Kris James Mitchener
language : en
Publisher:
Release Date : 2015
Was The Classical Gold Standard Credible On The Periphery written by Kris James Mitchener and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with Foreign exchange rates categories.
We use a standard metric from international finance, the currency risk premium, to assess the credibility of fixed exchange rates during the classical gold standard era. Theory suggests that a completely credible and permanent commitment to join the gold standard would have zero currency risk or no expectation of devaluation. We find that, even five years after a typical emerging-market country joined the gold standard, the currency risk premium averaged at least 220 basis points. Fixed-effects, panel-regression estimates that control for a variety of borrower-specific factors also show large and positive currency risk premia. In contrast to core gold standard countries, such as France and Germany, the persistence of large premia, long after gold standard adoption, suggest that financial markets did not view the pegs in emerging markets as credible and expected devaluation.