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Gradual portfolio adjustment : implications for global equity portfolios and returns

Bacchetta, Philippe; Van Wincoop, Eric - 2017

Modern open economy macro models assume the continuous adjustment of international portfolio allocation. We introduce gradual portfolio adjustment into a global equity market model. Our approach differs from related literature in two key dimensions. First, the time interval between portfolio...

Persistent link: https://www.econbiz.de/10011761264

Infrequent random portfolio decisions in an open economy model

Bacchetta, Philippe; Van Wincoop, Eric; Young, Eric R. - 2021

We introduce a portfolio friction in a two-country DSGE model where investors face a constant probability to make new portfolio decisions. The friction leads to a more gradual portfolio adjustment to shocks and a weaker portfolio response to changes in expected excess returns. We apply the model...

Persistent link: https://www.econbiz.de/10012801368

International portfolio choice with frictions : evidence from mutual funds

Bacchetta, Philippe; Tièche, Simon; Van Wincoop, Eric - 2020

Persistent link: https://www.econbiz.de/10012270711

Self-fulfilling risk panics

Bacchetta, Philippe; Tille, Cédric; Van Wincoop, Eric - 2010

Recent crises have seen very large spikes in asset price risk without dramatic shifts in fundamentals. We propose an explanation for these risk panics based on self-fulfilling shifts in risk made possible by a negative link between the current asset price and risk about the future asset price....

Persistent link: https://www.econbiz.de/10008797071

Regulating asset price risk

Bacchetta, Philippe; Tille, Cédric; Van Wincoop, Eric - 2011

There has been a long debate about whether speculators are stabilizing or not. We consider a model where speculators have a stabilizing role in normal times, but may also provoke large risk panics. The very feature that makes arbitrageurs liquidity providers in normal times, namely their...

Persistent link: https://www.econbiz.de/10009009577

Aggregate investment externalities and macroprudential regulation

Gersbach, Hans; Rochet, Jean-Charles - 2012

Evidence suggests that banks tend to lend a lot during booms, and very little during recessions. We propose a simple explanation for this phenomenon. We show that, instead of dampening productivity shocks, the banking sector tends to exacerbate them, leading to excessive fluctuations of credit,...

Persistent link: https://www.econbiz.de/10009558435

Incomplete information processing : a solution to the forward discount puzzle

Bacchetta, Philippe; Van Wincoop, Eric - 2005

managed, we investigate to what extent incomplete information processing can explain this puzzle. Two types of incompleteness … are considered: infrequent and partial information processing. We calibrate a two-country general equilibrium model to the … data and show that incomplete information processing can fully match the empirical evidence. It can also account for …

Persistent link: https://www.econbiz.de/10011397256

A scapegoat model of exchange rate fluctuations

Bacchetta, Philippe; Van Wincoop, Eric - 2004

of the exchange rate with noisy rational expectations, where investors have heterogeneous information on some structural …

Persistent link: https://www.econbiz.de/10011397704

Can information heterogeneity explain the exchange rate determination puzzle?

Bacchetta, Philippe; Van Wincoop, Eric - 2003

introduce symmetric information dispersion about future fundamentals in a dynamic rational expectations model in order to …

Persistent link: https://www.econbiz.de/10011397717

Why do consumer price react less than import prices to exchange rates?

Bacchetta, Philippe; Van Wincoop, Eric - 2002

It is well-known that the extent of pass-through of exchange rate changes to consumer prices is much lower than to import prices. One explanation is local distribution costs. Here we consider an alternative, complementary, explanation based on the optimal pricing strategies of firms. We consider...

Persistent link: https://www.econbiz.de/10011397767