Showing 1 - 10 of 301
We propose a dynamic APT multi-factor model with time-varying volatility for currency, bond and stock returns for ten European countries over the period 1977-1997. We exploit the cross-sectional dimension of the model to construct world portfolios, which, when added to the original list of...
Persistent link: https://www.econbiz.de/10005497958
We provide empirical evidence that risk sharing enhances specialization in production. To the best of our knowledge, this well-established and important theoretical proposition has not been tested before. Our empirical procedure is summarized as follows. First, we construct a measure of...
Persistent link: https://www.econbiz.de/10005504254
Fluctuations in GDP are more synchronized internationally than fluctuations in consumption, and they remain so even between financially-integrated economies, where the ranking should in theory be the reverse. This Paper shows this happens because correlations in GDP fluctuations rise with...
Persistent link: https://www.econbiz.de/10005791418
We show that international consumption risk sharing is significantly improved by capital flows, especially portfolio investment. Concomitantly, we show that poor institutions hamper risk sharing, but to an extent that decreases with openness. In particular, risk sharing is prevalent even among...
Persistent link: https://www.econbiz.de/10005497814
Recent empirical studies criticize the sluggish financial integration in the euro area and find that only interbank money markets are fully integrated so far. This paper studies the optimal regional and/or sectoral integration of financial systems given that integration is restricted to the...
Persistent link: https://www.econbiz.de/10005497717
Macroeconomic models of equity returns perform poorly. The proportion of daily index returns that these models explain is essentially zero. Instead of relying on macroeconomic determinants, our model includes a concept from microstructure order flow. Order flow is the proximate determinant of...
Persistent link: https://www.econbiz.de/10005788997
This Paper develops a test of contagion in financial markets based on bivariate correlation analysis, which generalizes existing tests, and applies it to the international effects of the Hong Kong stock market crisis of October 1997. Contagion is defined as a structural break in the...
Persistent link: https://www.econbiz.de/10005791976
This Paper analyses the issues raised by EMU for the relationships between the Euro area and the international financial system. The depreciation of the Euro exchange rate since the beginning of EMU has attracted most attention. The Paper argues that theory and the data support none of the...
Persistent link: https://www.econbiz.de/10005792090
The 2008 financial crisis is the worst economic crisis since the Great Depression of 1929. It has been characterised by a housing bubble in a context of rapid credit expansion, high risk-taking and exacerbated financial leverage, leading to deleveraging and credit crunch when the bubble burst....
Persistent link: https://www.econbiz.de/10008468635
Does financial development result in capital being reallocated more rapidly to industries where it is most productive? We argue that if this was the case, financially developed countries should see faster growth in industries with investment opportunities due to global demand and productivity...
Persistent link: https://www.econbiz.de/10005504771