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Pension Fund Managers Behavior In The Foreign Exchange Market

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  • Hernando Vargas H.

    ()

  • Rocío Betancourt

    ()

Abstract

The 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 Info

Paper provided by BANCO DE LA REPÚBLICA in its series BORRADORES DE ECONOMIA with number 003317.

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Length: 27
Date of creation: 01 Mar 2006
Date of revision:
Handle: RePEc:col:000094:003317

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Related research

Keywords: pension funds; foreign exchange market; market power;

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References

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  1. Tauchen, George E & Pitts, Mark, 1983. "The Price Variability-Volume Relationship on Speculative Markets," Econometrica, Econometric Society, Econometric Society, vol. 51(2), pages 485-505, March.
  2. Kenneth A. Froot & Takatoshi Ito, 1988. "On the Consistency of Short-run and Long-run Exchange Rate Expectations," NBER Working Papers 2577, National Bureau of Economic Research, Inc.
  3. Jeffrey A. Frankel & Kenneth A. Froot, 1985. "Using Survey Data to Test Some Standard Propositions Regarding Exchange Rate Expectations," NBER Working Papers 1672, National Bureau of Economic Research, Inc.
  4. Richard K. Lyons, 1991. "Private Beliefs and Information Externalities in the Foreign Exchange Market," NBER Working Papers 3889, National Bureau of Economic Research, Inc.
  5. Lui, Yu-Hon & Mole, David, 1998. "The use of fundamental and technical analyses by foreign exchange dealers: Hong Kong evidence," Journal of International Money and Finance, Elsevier, Elsevier, vol. 17(3), pages 535-545, June.
  6. Frankel, Jeffrey A. & Rose, Andrew K., 1995. "Empirical research on nominal exchange rates," Handbook of International Economics, Elsevier, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 33, pages 1689-1729 Elsevier.
  7. Frankel, Jeffrey A & Froot, Kenneth A, 1990. "Chartists, Fundamentalists, and Trading in the Foreign Exchange Market," American Economic Review, American Economic Association, American Economic Association, vol. 80(2), pages 181-85, May.
  8. Cheung, Yin-Wong & Wong, Clement Yuk-Pang, 2000. "A survey of market practitioners' views on exchange rate dynamics," Journal of International Economics, Elsevier, Elsevier, vol. 51(2), pages 401-419, August.
  9. Frankel, Jeff & Froot, Ken, 1986. "Using Survey Data to Test Standard Propositions Regarding Exchange Rate Expectations," Department of Economics, Working Paper Series, Department of Economics, Institute for Business and Economic Research, UC Berkeley qt1972q8wm, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  10. Shinji Takagi, 1991. "Exchange Rate Expectations: A Survey of Survey Studies," IMF Staff Papers, Palgrave Macmillan, vol. 38(1), pages 156-183, March.
  11. Taylor, Mark P. & Allen, Helen, 1992. "The use of technical analysis in the foreign exchange market," Journal of International Money and Finance, Elsevier, Elsevier, vol. 11(3), pages 304-314, June.
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Cited by:
  1. Jorge Roldos, 2007. "Pension Reform and Macroeconomic Stability in Latin America," IMF Working Papers 07/108, International Monetary Fund.
  2. Alejandro Reveiz & Carlos León & Freddy H. Castro & Gabriel piraquive, . "Modelo de simulación del valor de la pensión de un trabajador en Colombia," Borradores de Economia 553, Banco de la Republica de Colombia.

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