The euro-dollar exchange rate and equity flows

Kari Heimonen

Review of Financial Economics, 2009, vol. 18, issue 4, 202-209

Abstract: I examine equity flows between the US and the euro area and their impact on the euro-dollar exchange rate. I explain equity flows by examining the behavior of an international investor who maintains a minimum variance portfolio. An excess of euro area equity returns over US equity returns generates a flow of equity from the euro area to the US. The equity flow, the purchase of US equities by the euro-area residents, causes appreciation (depreciation) of the dollar (euro), while the purchase of euro area equities by US residents causes appreciation (depreciation) of the euro (dollar).

Keywords: Equity; portfolio; Euro-dollar; Exchange; rate; Equity; flows (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:revfin:v:18:y:2009:i:4:p:202-209

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