학회소식
[2012년 제 4차] Flight-to-Quality and correlation between Currency
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게시일 :
2012-12-12
Pair-wise analyses of a sample of nine developed and 12 emerging markets suggest that emerging country currency returns are positively correlated with their stock returns. These ties between currency and stock returns appear generated by international capital flows based on “flight-to-quality” in down-markets. Since global equity markets are positively correlated, this implies that currencies provide added risks for investors in developed countries investing in emerging markets and natural hedges for investors in emerging countries investing in developed markets. Using a unique sample of 27 “Siamese Twin” Korean international mutual fund pairs holding identical underlying foreign assets but offering different currency hedging alternatives, we find evidence that hedging currency risks undoes the natural hedge and increases the total return volatility.
