The euro-dollar exchange rate and equity flows
Abstract
I examine equity flows between the US and the euro area and their impact on the euro-dollar exchange rate. I explain equity flows by examining the behavior of an international investor who maintains a minimum variance portfolio. An excess of euro area equity returns over US equity returns generates a flow of equity from the euro area to the US. The equity flow, the purchase of US equities by the euro-area residents, causes appreciation (depreciation) of the dollar (euro), while the purchase of euro area equities by US residents causes appreciation (depreciation) of the euro (dollar).Download Info
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Bibliographic Info
Article provided by Elsevier in its journal Review of Financial Economics.
Volume (Year): 18 (2009)
Issue (Month): 4 (October)
Pages: 202-209
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/620170
Related research
Keywords: Equity portfolio Euro-dollar Exchange rate Equity flows;References
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