Global Portfolio Rebalancing and Exchange Rates

Nelson Camanho, Harald Hau and Helene Rey

No 18-03, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We examine international equity allocations at the fund level and show how different returns on the foreign and domestic proportion of portfolios determine rebalancing behavior and trigger capital flows. We document the heterogeneity of rebalancing across fund types, its greater intensity under higher exchange rate volatility, and the exchange rate effect of such rebalancing. The observed dynamics of equity returns, exchange rates, and fund-level capital flows are compatible with a model of incomplete FX risk trading in which exchange rate risk partially segments international equity markets.

Keywords: International equity funds; portfolio rebalancing; valuation effects; exchange rates (search for similar items in EconPapers)
JEL-codes: G11 G15 G23 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2018-01, Revised 2018-06
New Economics Papers: this item is included in nep-ifn and nep-opm
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Citations: View citations in EconPapers (16)

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Related works:
Journal Article: Global Portfolio Rebalancing and Exchange Rates (2022)
Working Paper: Global Portfolio Rebalancing and Exchange Rates (2020)
Working Paper: Global Portfolio Rebalancing and Exchange Rates (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1803

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