This paper analyzes the role of nonseparable utility and nontradables in business cycles and portfolio choice using a two-country, two-sector production economy model with a fairly general utility function. I find that nonseparability in utility can change the optimal portfolio choice significantly. Unlike the results of Stockman and Dellas (1989) or Baxter, Jermann and King (1998), the optimal...

We demonstrate that simply by using the ethnic makeup surrounding a firm’s location, we can predict, on average, which trade links are valuable for firms. Using customs and port authority data on the international shipments of all U.S. publicly-traded firms, we show that firms are significantly more likely to trade with countries that have a strong resident population near their firm headquarte...

The authors model trading by foreign and domestic investors in developed-country equity markets. The key assumptions are that (i) both the foreign and domestic investor populations contain investors of different sophistication, and (ii) investor sophistication matters for performance in both public equity and private off-market investments. A quantitative model with these assumptions delivers a...

This paper analyzes the effectiveness of controls on capital inflows. In particular, we analyze in great detail the Chilean experience with the use of the unremunerated reserve requirement. We examine the effects of the controls applied in Chile in 1991–98 on interest rates, real exchange rate, and the volume and composition of capital inflows. The effects are elusive and it is difficult to pin...

Regulation of Money Market Funds (MMFs) in the EU requires some categories MMFs to consider applying liquidity management tools if they breach a minimum ‘weekly’ requirement. Anticipation application such is plausible amplifier run risks. Using larger European dataset than previously studied, we assess whether proximity thresholds explains differences redemptions both at start COVID-19 crisis a...

The aim of this study is to examine the validity Fama's efficient market hypothesis for G7 countries. In context, effectiveness test on weak form was conducted with help non-stationary panel unit root tests within countries period 1990-2020. Firstly, cross section dependence examined CDlm test. As a result presence dependency, CADF and Hadri Kurozumi second generation tests, which take into acc...

This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This paper shows that the dominant view that the high variabi...

Long-term comovements of national stock markets in three EMS (European Monetary System) countries—France, Germany and Italy—are examined. The EMS stock markets are found to display long-term comovements governed by two common permanent components. To identify some interpretable sources of such long-term market comovements, the study explores whether they can be linked to similar comovements in ...

Given the cross-sectional and temporal variation in their liquidity, emerging equity markets provide an ideal setting to examine the impact of liquidity on expected returns. Our main liquidity measure is a transformation of the proportion of zero daily firm returns, averaged over the month. We find that it significantly predicts future returns, whereas alternative measures such as turnover do n...