Speaker: Professor Zhi Da (University of Notre Dame, Mendoza College of Business)
Hosted by: University of Liverpool Management School's Accounting and Finance Group
Open to: Management School academic staff, with no sign up needed
Date: Wednesday 27 September 2023
Time: 15:00
Place: Management School - Seminar Room 6 (third floor)
Abstract
Frequent, yet uninformed, market timing recommendations by a financial advisory firm generate significant flows for Chilean pension funds.
These flows give rise to substantial trading in currency markets due to the high allocation to international equities.
We estimate a relatively low price elasticity of 0.81 for the Chilean peso.
Hedging by the banking sector propagates the demand fluctuations from the spot to the forward currency market, and results in deviations from covered interest rate parity.
Using bank balance sheet data, we confirm that banks’ risk bearing constraints create limits to arbitrage.
Co-authored by Professor Zhi Da, Professor Felipe Aldunate (University of the Andes, ESE Business School), Professor Borja Larrain (Pontifical Catholic University of Chile) and Professor Clemens Sialm (University of Texas at Austin, McCombs School of Business).
Keywords
Exchange rates, CIP deviations, Pension funds, Market efficiency
Full paper
Aldunate, F., Da, Z. Larrain, B. and Sialm, C. (2023). 'Pension Fund Flows, Exchange Rates, and Covered Interest Rate Parity'.
- DOI: 10.2139/ssrn.4234493
Speaker
Zhi Da is a Professor of Finance at the University of Notre Dame, Mendoza College of Business.
His research focuses mainly on empirical asset pricing and investment, among other areas.
Zhi's papers have been published in the Journal of Finance, Review of Financial Studies, Journal of Financial Economics, among others.
He currently covers several associate editor positions for many high-quality journals including the Journal of Finance, Management Science, Journal of Financial and Quantitative Analysis, Journal of Banking and Finance, etc.
Zhi was a finalist for the Lehman Brothers Fellowship for Research Excellence in Finance (2005) and he has received the 2017 JFQA William F. Sharpe Award for Scholarship in Financial Research, among other research awards and grants (eg Moody’s KMV and Morgan Stanley).
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