Does funding liquidity help predict U.S Dollar returns?
Autor(a) principal: | |
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Data de Publicação: | 2019 |
Tipo de documento: | Dissertação |
Idioma: | eng |
Título da fonte: | Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
Texto Completo: | http://hdl.handle.net/10400.14/29042 |
Resumo: | Predicting the future value of an exchange rate has been a long-standing challenge in economics. There is still no evidence of any model or technique that has consistently been proven to beat the random walk model. The current objective of this thesis is to check if there is a liquidity channel tied to banking funding that allows us to explain some part of the performance of currency returns. The present analysis focuses on the paper “Risk Appetite and Exchange Rates” by Adrian et al. (2015) where it is claimed that there is a statistically significant relationship between banks’ funding capacities and changes in exchange rates. This relation seems to be more prominent for currencies of more developed countries. In my analysis, the liquidity aggregates (Commercial Paper and Repo) also display some explanatory power, though less than in Adrian et al. Importantly, however, I show that using linear time de-trending as the authors do presents stationarity problems for both liquidity aggregates, especially for Repo volume. The statistical inference of the OLS results is therefore limited. Moreover, in the fitted models, adding a dummy variable and a dummy variable with interactions with the two liquidity aggregates, as in Adrian et al. (2015), reduces the individual significance of the coefficients’ estimates for the liquidity variables. Overall, my analysis casts doubt on the results obtained in Adrian et al. (2015). |
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Does funding liquidity help predict U.S Dollar returns?Exchange ratesStationarityLiquidity fundingDomínio/Área Científica::Ciências Sociais::Economia e GestãoPredicting the future value of an exchange rate has been a long-standing challenge in economics. There is still no evidence of any model or technique that has consistently been proven to beat the random walk model. The current objective of this thesis is to check if there is a liquidity channel tied to banking funding that allows us to explain some part of the performance of currency returns. The present analysis focuses on the paper “Risk Appetite and Exchange Rates” by Adrian et al. (2015) where it is claimed that there is a statistically significant relationship between banks’ funding capacities and changes in exchange rates. This relation seems to be more prominent for currencies of more developed countries. In my analysis, the liquidity aggregates (Commercial Paper and Repo) also display some explanatory power, though less than in Adrian et al. Importantly, however, I show that using linear time de-trending as the authors do presents stationarity problems for both liquidity aggregates, especially for Repo volume. The statistical inference of the OLS results is therefore limited. Moreover, in the fitted models, adding a dummy variable and a dummy variable with interactions with the two liquidity aggregates, as in Adrian et al. (2015), reduces the individual significance of the coefficients’ estimates for the liquidity variables. Overall, my analysis casts doubt on the results obtained in Adrian et al. (2015).A previsão do valor futuro de uma taxa de câmbio é um desafio de há muito tempo no campo da economia. Ainda não há provas concretas de nenhum método que seja capaz de bater o random walk model, na previsão das taxas de câmbio futuras. O objectivo desta tese é analisar se existe algum liquidity channel relacionado com o mecanismo de financiamento dos bancos que ajude a explicar alguma parte da performance do retorno das moedas. A análise desta tese debruça-se sobre o paper “Risk Appetite and Exchange Rates” por Adrian et al. (2015), onde se afirma que existe uma relação estatisticamente significativa e positiva entre a capacidade de financiamento dos bancos e os retornos da moeda em que é denominado esse financiamento. Esta relação parece mais forte entre moedas de países desenvolvidos. Na minha análise, os agregados de liquidez (Papel Comercial e Repo) também revelam algum poder explicativo, ainda que este seja menor que aquele apresentado em Adrian et al. (2015). Digno de nota é que o método de de-trending (linear time de-trend), usado pelos autores, produz séries com problemas de estacionariedade, especialmente para o valor do Repo. A inferência estatística é portanto limitada. Além disso, nos modelos ajustados, usar uma dummy variable e uma dummy variable com interacções com os agregados de liquidez, como em Adrian et al. (2015), reduz a significância individual para as estimativas dos coeficientes das variáveis de liquidez. Em suma, o meu estudo levanta dúvidas sobre os resultados encontrados em Adrian et al. (2015).Albuquerque, Rui André Pinto deVeritati - Repositório Institucional da Universidade Católica PortuguesaRodrigues, Pedro Themido Pereira2019-12-23T12:47:06Z2019-05-022019-05-02T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/masterThesisapplication/pdfhttp://hdl.handle.net/10400.14/29042TID:202270769enginfo:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-07-12T17:34:34Zoai:repositorio.ucp.pt:10400.14/29042Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T18:23:18.638081Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse |
dc.title.none.fl_str_mv |
Does funding liquidity help predict U.S Dollar returns? |
title |
Does funding liquidity help predict U.S Dollar returns? |
spellingShingle |
Does funding liquidity help predict U.S Dollar returns? Rodrigues, Pedro Themido Pereira Exchange rates Stationarity Liquidity funding Domínio/Área Científica::Ciências Sociais::Economia e Gestão |
title_short |
Does funding liquidity help predict U.S Dollar returns? |
title_full |
Does funding liquidity help predict U.S Dollar returns? |
title_fullStr |
Does funding liquidity help predict U.S Dollar returns? |
title_full_unstemmed |
Does funding liquidity help predict U.S Dollar returns? |
title_sort |
Does funding liquidity help predict U.S Dollar returns? |
author |
Rodrigues, Pedro Themido Pereira |
author_facet |
Rodrigues, Pedro Themido Pereira |
author_role |
author |
dc.contributor.none.fl_str_mv |
Albuquerque, Rui André Pinto de Veritati - Repositório Institucional da Universidade Católica Portuguesa |
dc.contributor.author.fl_str_mv |
Rodrigues, Pedro Themido Pereira |
dc.subject.por.fl_str_mv |
Exchange rates Stationarity Liquidity funding Domínio/Área Científica::Ciências Sociais::Economia e Gestão |
topic |
Exchange rates Stationarity Liquidity funding Domínio/Área Científica::Ciências Sociais::Economia e Gestão |
description |
Predicting the future value of an exchange rate has been a long-standing challenge in economics. There is still no evidence of any model or technique that has consistently been proven to beat the random walk model. The current objective of this thesis is to check if there is a liquidity channel tied to banking funding that allows us to explain some part of the performance of currency returns. The present analysis focuses on the paper “Risk Appetite and Exchange Rates” by Adrian et al. (2015) where it is claimed that there is a statistically significant relationship between banks’ funding capacities and changes in exchange rates. This relation seems to be more prominent for currencies of more developed countries. In my analysis, the liquidity aggregates (Commercial Paper and Repo) also display some explanatory power, though less than in Adrian et al. Importantly, however, I show that using linear time de-trending as the authors do presents stationarity problems for both liquidity aggregates, especially for Repo volume. The statistical inference of the OLS results is therefore limited. Moreover, in the fitted models, adding a dummy variable and a dummy variable with interactions with the two liquidity aggregates, as in Adrian et al. (2015), reduces the individual significance of the coefficients’ estimates for the liquidity variables. Overall, my analysis casts doubt on the results obtained in Adrian et al. (2015). |
publishDate |
2019 |
dc.date.none.fl_str_mv |
2019-12-23T12:47:06Z 2019-05-02 2019-05-02T00:00:00Z |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/masterThesis |
format |
masterThesis |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://hdl.handle.net/10400.14/29042 TID:202270769 |
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http://hdl.handle.net/10400.14/29042 |
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TID:202270769 |
dc.language.iso.fl_str_mv |
eng |
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eng |
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info:eu-repo/semantics/openAccess |
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openAccess |
dc.format.none.fl_str_mv |
application/pdf |
dc.source.none.fl_str_mv |
reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação instacron:RCAAP |
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Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
instacron_str |
RCAAP |
institution |
RCAAP |
reponame_str |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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