When In Peril Retrench
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When In Peril Retrench
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Author : Fernando Broner
language : en
Publisher: International Monetary Fund
Release Date : 2004-07
When In Peril Retrench written by Fernando Broner 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 2004-07 with Business & Economics categories.
One plausible mechanism through which financial market shocks may propagate across countries is through the effect of past gains and losses on investors' risk aversion. We first present a simple model on how heterogeneous changes in investors' risk aversion affect portfolio decisions and stock prices. Second, we empirically show that, when funds' returns are below average, they adjust their holdings toward the average (or benchmark) portfolio. In other words, they tend to sell the assets of countries in which they were "overweight," increasing their exposure to countries in which they were "underweight." Based on this insight, we construct a matrix of financial interdependence reflecting the extent to which countries share overexposed funds. This index can improve predictions about which countries are likely to be affected by contagion from crisis centers.
When In Peril Retrench
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Author : Fernando Broner
language : en
Publisher:
Release Date : 2006
When In Peril Retrench written by Fernando Broner and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with categories.
One plausible mechanism through which financial market shocks may propagate across countries is through the effect of past gains and losses on investors` risk aversion. We first present a simple model on how heterogeneous changes in investors` risk aversion affect portfolio decisions and stock prices. Second, we empirically show that, when funds` returns are below average, they adjust their holdings toward the average (or benchmark) portfolio. In other words, they tend to sell the assets of countries in which they were quot;overweight,quot; increasing their exposure to countries in which they were quot;underweight.quot; Based on this insight, we construct a matrix of financial interdependence reflecting the extent to which countries share overexposed funds. This index can improve predictions about which countries are likely to be affected by contagion from crisis centers.
When In Peril Retrench
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Author :
language : en
Publisher:
Release Date : 2004
When In Peril Retrench written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004 with categories.
Changes In The Global Investor Base And The Stability Of Portfolio Flows To Emerging Markets
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Author : Mr.Luis Brandao-Marques
language : en
Publisher: International Monetary Fund
Release Date : 2015-12-28
Changes In The Global Investor Base And The Stability Of Portfolio Flows To Emerging Markets written by Mr.Luis Brandao-Marques 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 2015-12-28 with Business & Economics categories.
An analysis of mutual-fund-level flow data into EM bond and equity markets confirms that different types of funds behave differently. Bond funds are more sensitive to global factors and engage more in return chasing than equity funds. Flows from retail, open-end, and offshore funds are more volatile. Global funds are more stable in their EM investments than “dedicated” EM funds. Differences in the stability of flows from ultimate investors play a key role in explaining these patterns. The changing mix of global investors over the past 15 year has probably made portfolio flows to EMs more sensitive to global financial conditions.
Estimation And Out Of Sample Prediction Of Sudden Stops
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Author : Mr.Fabio Comelli
language : en
Publisher: International Monetary Fund
Release Date : 2015-06-25
Estimation And Out Of Sample Prediction Of Sudden Stops written by Mr.Fabio Comelli 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 2015-06-25 with Business & Economics categories.
We identify episodes of sudden stops in emerging economies and estimate the probability to observe them. Sudden stops are more likely when global growth falters, risk aversion in financial markets rises, and vulnerabilities in the external and financial sectors increase. However, the significance of the explanatory variables vary across regions. In Latin America and Eastern Europe, gross capital inflows are more responsive to changes in global growth than in Asia. Trade linkages tend to be more important than financial linkages in Eastern Europe, while in Asia and Latin America the opposite is true. The model captures only a third of sudden stops outside the estimation sample, but issues reliable sudden stop signals.
Theories Of Contagion
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Author : Andreas Vester
language : en
Publisher: diplom.de
Release Date : 2006-10-02
Theories Of Contagion written by Andreas Vester and has been published by diplom.de this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006-10-02 with Business & Economics categories.
Inhaltsangabe:Abstract: In recent years academics and policy makers have become more and more interested in the phenomenon of contagion, a concept involving the transmission of a financial crisis from one country to one or more other countries. During the 1990s world capital markets witnessed a number of financial crises. In 1992 the Exchange Rate Mechanism (ERM) crisis hit the European continent. Several countries in Latin America have been rocked during the 1994-95 Tequila crisis, and the Asian Flu spread through East Asian countries in 1997-98 with dramatic social implications. Later in 1998 the famous hedge fund Long Term Capital Management (LTCM) had to file for bankruptcy and the Russian debt failure shocked international capital markets and increased volatility on a global scale. The crisis spread to as far as Brazil in early 1999 and developed markets have become victims as well. The question asked by academics and policy makers is how countries should behave in order to avoid contagion. To answer this question it is necessary to understand the different channels of contagion in greater detail and how a crisis can be transmitted from one country to another. The objective of this paper is to highlight those channels and to present a number of models and theories of contagion, which have recently been developed by academics. In general, there are several strands of theories in the literature that try to explain the transmission of crises. During the mid and late 1990s fundamental-based contagion and spillovers became popular among researchers and policy makers. Furthermore, financial linkages have been known to contribute to contagion. In contrast, in recent years, portfolio flows of international investors moved into the focus of academics. The advocates of fundamental-based contagion and spillovers argue that trade linkages between countries are responsible for contagion. For instance, a devaluation of a country's currency may lead to a negative change in fundamentals of its trading partners. On the other hand, contagion due to financial linkages is mainly explained by the fact that countries share the same banks and therefore have common creditors. A crisis in one country then leads to a deteriorating balance sheet of those common creditors. This in turn may force banks to withdraw money out of other countries in order to avoid further losses, a fact that leads to contagious sellouts. The role of international portfolio flows, which is [...]
Country Transparency And The Global Transmission Of Financial Shocks
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Author : Mr.Luis Brandão Brandao Marques
language : en
Publisher: International Monetary Fund
Release Date : 2013-07-03
Country Transparency And The Global Transmission Of Financial Shocks written by Mr.Luis Brandão Brandao Marques 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 2013-07-03 with Business & Economics categories.
This paper considers the role of country-level opacity (the lack of availability of information) in amplifying shocks emanating from financial centers. We provide a simple model where, in the presence of ambiguity (uncertainty about the probability distribution of returns), prices in emerging markets react more strongly to signals from the developed market, the more opaque the emerging market is. The second contribution is empirical evidence for bond and equity markets in line with this prediction. Increasing the availability of information about public policies, improving accounting standards, and enhancing legal frameworks can help reduce the unpleasant side effects of financial globalization.
Delegated Portfolio Management Benchmarking And The Effects On Financial Markets
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Author : Ms.Deniz Igan
language : en
Publisher: International Monetary Fund
Release Date : 2015-09-08
Delegated Portfolio Management Benchmarking And The Effects On Financial Markets written by Ms.Deniz Igan 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 2015-09-08 with Business & Economics categories.
We analyze the implications of linking the compensation of fund managers to the return of their portfolio relative to that of a benchmark—a common solution to the agency problem in delegated portfolio management. In the presence of such relativeperformance- based objectives, investors have reduced expected utility but markets are typically more informative and deeper. Furthermore, in a multiple asset/market framework we show that (i) relative performance concerns lead to an increase in the correlation between markets (financial contagion); (ii) benchmark inclusion increases price volatility; (iii) home bias emerges as a rational outcome. When information is costly, information acquisition is hindered and this attenuates the effects on informativeness and depth of the market.
Sovereign Risk And Financial Crises
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Author : Michael Frenkel
language : en
Publisher: Springer Science & Business Media
Release Date : 2013-03-14
Sovereign Risk And Financial Crises written by Michael Frenkel and has been published by Springer Science & Business Media this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-03-14 with Business & Economics categories.
Sovereign risk and financial crises play a key role in current international economic developments, particularly in the case of economic downturns. As the Asian economic crisis in the late 1990s revealed once again, financial crises are the rule rather than the exception in capitalist economies. The event also revealed that international public debt agreements are contingent claims. In a world of increasing economic interdependencies, the issues of financial crises and country defaults are of critical importance. This volume goes to the heart of the academic discussion on sovereign risk and financial crises by centering on quantitative-empirical aspects, evaluating prominent approaches, and by proposing new methods. Part I of the volume identifies key factors and processes that are central in analyzing sovereign risk while Part II focuses on the determinants and effects of financial crises.
Vanishing Contagion
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Author : Mr.Sergio L. Schmukler
language : en
Publisher: International Monetary Fund
Release Date : 2006-01-01
Vanishing Contagion written by Mr.Sergio L. Schmukler 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 2006-01-01 with Business & Economics categories.
While a number of emerging market crises were characterized by widespread contagion during the 1990s, more recent crises (notably, in Argentina) have been mostly contained within national borders. This has led some observers to wonder whether contagion might have become a feature of the past, with markets now better discriminating between countries with good and bad fundamentals. This paper argues that a prudent working assumption is that contagion has not vanished permanently. Available data do not seem to point to a disappearance of the main channels that contribute to transmitting crises across countries. Moreover, anticipation of the Argentine crisis by international investors may help explain the recent absence of contagion.