Towards Greater Diversification in Central Bank Reserves

Marie Brière (marie.briere@amundi.com), Valérie Mignon (valerie.mignon@parisnanterre.fr), Kim Oosterlinck and Ariane Szafarz

No 15-051, Working Papers CEB from ULB -- Universite Libre de Bruxelles

Abstract: This paper compares the performance of various diversification strategies regarding foreign exchange reserves. The aim is to provide central banks with guidelines in portfolio allocation. We pay particular attention to the situation of upward pressures on U.S. interest rates by implementing our analysis over both the whole 1986-2015 period and a rising rate subsample. Relying on geometric tests of mean-variance efficiency, we show that introducing currencies weakly correlated to the USD (AUD and CAD) significantly reduces portfolio risk. Expected return is improved through mortgage-backed securities, corporate bonds, and equities.

Keywords: Foreign exchange reserves; diversification; asset allocation (search for similar items in EconPapers)
JEL-codes: E58 F31 G11 G15 (search for similar items in EconPapers)
Pages: 25 p.
Date: 2015-12-11
New Economics Papers: this item is included in nep-mon
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Towards greater diversification in central bank reserves (2016)
Working Paper: Towards Greater Diversification in Central Bank Reserves (2016)
Working Paper: Towards Greater Diversification in Central Bank Reserves (2016)
Working Paper: Towards Greater Diversification in Central Bank Reserves (2015)
Working Paper: Towards Greater Diversification in Central Bank Reserves (2015)
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