Pension Fund Managers Behavior In The Foreign Exchange Market
AbstractThe effects of the Pension Fund Managers (PFMs) behavior on the foreign exchange market may be important, given the increasing size of their portfolio and their possible market power. Some authors argue that when big investors like PFMs trade large volumes in the foreign exchange market, they may influence other agents’ decisions, increasing the impact of the PFMs’ actions on the exchange rate. However, when PFMs have market power, they will take into account their influence on the exchange rate and will moderate their trading volume. Hence, there might be a mitigating effect that reduces the pressure on the exchange rate. This paper seeks to demonstrate the existence of this effect under different theoretical foreign exchange market structures.
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Bibliographic InfoPaper provided by Banco de la Republica de Colombia in its series Borradores de Economia with number 391.
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pension funds; foreign exchange market; market power.;
Find related papers by JEL classification:
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
- F31 - International Economics - - International Finance - - - Foreign Exchange
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-04-22 (All new papers)
- NEP-FIN-2006-04-22 (Finance)
- NEP-FMK-2006-04-22 (Financial Markets)
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