EconPapers    
Economics at your fingertips  
 

Real financial market exchange rate volatility and portfolio flows

Valentyna Ozimkovska ()
Additional contact information
Valentyna Ozimkovska: University of Kiel

International Economics and Economic Policy, 2018, vol. 15, issue 2, No 3, 303 pages

Abstract: Abstract This paper studies the relationship between real financial market exchange rate volatility and US cross-border equity flows. We found strong evidence that causality goes from real financial market exchange rate volatility to equity flows. According to our results, real financial market exchange rate volatility negatively influences purchases of foreign equity. This finding is in line with the portfolio optimization theory. The impact of real financial market exchange rate volatility on sales of foreign equity is also negative. This result can be explained by the theory of behavioral finance which states that investors are reluctant to realize losses of their portfolios. This is why investors decrease sales of assets when riskiness of the assets increases. The impact of real financial market exchange rate on net purchases of foreign equity is positive. It follows from these results that sales of foreign equity decrease more strongly than purchases of foreign equity when riskiness of foreign assets increases.

Keywords: Real financial market exchange rate; Volatility; Portfolio flows (search for similar items in EconPapers)
JEL-codes: C33 E52 E58 F42 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s10368-017-0405-3 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:iecepo:v:15:y:2018:i:2:d:10.1007_s10368-017-0405-3

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10368/PS2

DOI: 10.1007/s10368-017-0405-3

Access Statistics for this article

International Economics and Economic Policy is currently edited by Paul J.J. Welfens, Holger C. Wolf, Christian Pierdzioch and Christian Richter

More articles in International Economics and Economic Policy from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

 
Page updated 2025-03-19
Handle: RePEc:kap:iecepo:v:15:y:2018:i:2:d:10.1007_s10368-017-0405-3