Foreign investors and crises: There is no safe haven for all seasons

Maurizio Michael Habib, Livio Stracca 28 February 2014

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The resilience of the international status of the US dollar remains surprising (Frankel 2013). At the peak of the global financial crisis which started in the US, in particular in the last quarter of 2008, US treasury yields fell and the US dollar appreciated. This has created the impression of a stronger demand for US securities in general. The evidence suggests, however, that non-US residents were instead relatively ‘picky’, fleeing into short-term US Treasury bills but reducing purchases of longer-dated Treasury bonds and shedding other US bonds.

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Topics:  Financial markets Global crisis

Tags:  US, reserve currency, financial crisis, asset pricing, global crisis, risk aversion, home bias, safe haven, portfolio flows

Fama, Hansen, Shiller: Nobelists 2013

Marianne Andries, Bruno Biais 21 October 2013

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The 2013 Nobel Prize in economics has been awarded to Lars Hansen, Eugene Fama and Robert Shiller "for their empirical analysis of asset prices." These were three important actors in the asset-pricing literature whose contributions are given context herein.

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Topics:  Financial markets

Tags:  Nobel Prize, asset pricing

Asset pricing in the frequency domain: Theory and empirics

Ian Dew-Becker, Stefano Giglio 20 October 2013

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Economic fluctuations act at frequencies that range from the hourly or even minute-by-minute level – such as shifts in electricity demand due to temperature fluctuations – to shocks that last for decades or longer – such as large-scale technological changes. While economic policy can do little to change factors like the temperature at a particular time of day, it can affect the behaviour of the economy at a certain range of frequencies – for example by trying to stabilise the business cycle or encourage innovation that affects long-run growth rates.

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Topics:  Financial markets Macroeconomic policy Monetary policy

Tags:  financial markets, business cycles, asset pricing, Stabilisation policy, fluctuations, habit formation

Capital market theory after the efficient market hypothesis

Dimitri Vayanos, Paul Woolley 05 October 2009

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Forty years have passed since the principles of classical economics were first applied formally to finance through the contributions of Eugene Fama (1970) and his now-renowned fellow academics. Over the intervening years, capital market theory and the efficient market hypothesis have been developed and modified to form an elegant and comprehensive framework for understanding asset pricing and risk.

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Topics:  Financial markets

Tags:  asset pricing, Behavioural economics, efficient market hypothesis

Understanding exchange rates as asset prices

Jian Wang 05 September 2008

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The foreign exchange market is the largest and most liquid financial market in the world. Its average daily turnover exceeded $3 trillion as of April 2007. Currency trading is very important for individuals, firms, and governments that buy foreign goods and services, invest abroad, and seek profit or protection through speculation. Market supply and demand drive exchange rates up and down every day, imposing risks on participants of the foreign exchange markets.

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Topics:  Exchange rates

Tags:  exchange rates, forecasting, asset pricing