京都大学 大学院経済学研究科・経済学部

(Title):

”International Investments, Interest Rates, and Exchange Rates: What Can We Learn from Multi-Country Data?”

Abstract :

The term structure of interest rates and the dynamics of exchange rates have been the subject of research in risk management by both practitioners and academicians for a long time. The approach has been to develop theoretical probabilistic models to describe interest rates of bonds with different maturities. However, most research has focused on developing models for single countries, and only recently, two countries. In order to describe a complete market, a more sophisticated setting is proposed in this research. A theoretical model of at least three countries/regions is developed. The US, European Union, Japan are used for the theoretical development and the empirical investigation. The currency dynamics are also explored theoretically in this environment. The theoretical model is examined empirically using interest rate and currency data. The research produces state variables that reveal what macro-economic and/or financial factors influence the economies. The analyses shed light on the Home Bias puzzle, which is the preference of domestic securities, even though multi-national diversified portfolios are typically superior. The Forward Premium Puzzle, the tendency of high-interest rate currencies to gain value, is also explored. Finally, the forecasting power of the models is examined. The influence of the frequency of data used is the analyses is documented as well.

JEL Classification: F31, E43, G12, G15

Keywords: International Finance and Economics; Risk Management; Exchange Rates; Term Structure of Interest Rates; Creidt Risk; Stochastic Continuous Time Models; Nonlinear Empirical Analysis; Home Bias; Forward Premium Puzzle

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Contact:  cgir2026[at]mail2.adm.kyoto-u.ac.jp (Please replace [at] with @)