The stock market returns to the strength of the currency


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There is a new paper inside Oxford Open Economics, published by Oxford University Press, shows that the U.S. currency can be considered as a major global factor that investors should look at when making their price allocation decisions. in new industries. The global integration of financial institutions and capital markets, which means the rapid growth of global investors, such as banks, mutual funds and hedge funds, has changed financial conditions. within the emerging market sectors and exchange rates have become an important factor in the flow of money into these industries. .

The researchers measured performance using Morgan Stanley Capital International countries for 50 emerging market economies from January 2006 to August 2021. They found a higher return on local capital to go. as well as an increase in the value of the local currency. and vice versa. Therefore, currency exchange rates are much higher.

Then, the researchers released a “dollar beta,” which explained how the price returns to swings in the broad currency index, the value of the U.S. currency relative to foreign currencies. Yes. Researchers have found that appreciation for the general financial index is associated with a decrease in local funds.

Lastly, they see that the growth of the stock market has a higher beta, which means the more volatile the currency, the higher the average return, and the expectation that investors will be paid to hold prices in a high beta market. by high average return.

While central banks do not routinely enter local equity markets by directly buying drugs, researchers here believe that the relationship between the appreciation of the U.S. currency and local financial conditions shows. central banks and investors will benefit from monitoring the large number of foreign investments in domestic markets and the types of investors, as well as conducting rigorous testing.

“The financial path of stock prices works through the potential of market participants and is shown to respond to financial conditions as the transition moves,” said Hyun Song Shin. , one of the authors of the paper. “The return on investment would have been increased by the return on local currency.

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More information:
Beta money and refund, Oxford Open… 10.1093 / ooec / odac003

Presented by Oxford University Press

Directions: Stock market returns to currency strength (2022, March 29) Retrieved 29 March 2022 from

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