Chapter 3 Dynamic Linkages between Global Macro Hedge Funds and Traditional Financial Assets

Wafa Kammoun Masmoudi

A chapter in Nonlinear Modeling of Economic and Financial Time-Series, 2010, pp 41-81 from Emerald Group Publishing Limited

Abstract: Purpose – The purpose of this chapter is to present an investigation on the dynamic linkages between global macro hedge funds and traditional financial assets of developed and emerging markets. Methodology/approach – To explore relationships among these price indices, we analyse Granger causality and vector autoregression (VAR) dynamics through impulse response functions. Besides, multivariate cointegration is used to know long-term relationships between assets and allows risk-averse investors to reduce uncertainty. Finally, a vector error correction model (VECM) provides active asset managers the opportunity to anticipate short-term price movements. Findings – Our results show that in a Granger causality sense, we observe long- and short-term relationships between global macro hedge funds and traditional financial assets for Canada, France and Germany. This implies that opportunities for international portfolio diversification are significantly lower for countries having relationships between assets. For Canada, France and Germany, the risk-averse investors can reduce their long-term volatility by investing according to the cointegrating vector, whereas active managers can benefit from the knowledge of short-term asset price movements. The VEC Pairwise Granger causality in the short term confirms our analysis of causality according to VAR models. Originality/value of paper – These results are original because they help the investor to understand the dynamics of the relationship between global macro hedge funds and traditional financial assets.

Keywords: global; macro; hedge; funds (search for similar items in EconPapers)
Date: 2010
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... 0386(2010)0000020008
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
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:eme:isetez:s1571-0386(2010)0000020008

DOI: 10.1108/S1571-0386(2010)0000020008

Access Statistics for this chapter

More chapters in International Symposia in Economic Theory and Econometrics from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().