Do the carry trades respond to geopolitical risks? Evidence from BRICS countries

IF 2.8 2区经济学 Q1 ECONOMICS

Economic Systems Pub Date : 2023-06-01 DOI:10.1016/j.ecosys.2022.101000

Oguzhan Cepni , Furkan Emirmahmutoglu , Ibrahim Ethem Guney , Muhammed Hasan Yilmaz

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引用次数: 1

Abstract

This paper aims to analyze the implications of geopolitical risks on the return and volatility of carry trade transactions in the context of BRICS countries for the period 2006–2020. Fixed effects regressions considering the sample countries as a single portfolio document that geopolitical risks are correlated with volatility, while the results are inconclusive for returns. The non-parametric time-varying coefficients panel data estimations further indicate that the effect of geopolitical risks on carry trade volatility is amplified during the Global Financial Crisis and the post-2016 episode. Moving to the disaggregated data, the time-varying robust Granger causality test of Rossi and Wang (2019) show that geopolitical risks have a significant in-sample predictive power for both carry trade return and volatility during a myriad of sub-periods, which can not be captured by standard constant parameter techniques in the presence of instabilities. Overall, our empirical results suggest that the exposure to geopolitical risks should be taken into account by global investors for risk diversification purposes when entering carry trade positions in BRICS countries.

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套利交易对地缘政治风险有反应吗？来自金砖国家的证据

本文旨在分析2006-2020年金砖国家背景下地缘政治风险对套利交易收益和波动性的影响。固定效应回归考虑样本国家作为一个单一的投资组合文件，地缘政治风险与波动性相关，而结果是不确定的回报。非参数时变系数面板数据估计进一步表明，地缘政治风险对套利交易波动的影响在全球金融危机和2016年后的事件中被放大。转到分解数据，Rossi和Wang(2019)的时变稳健格兰杰因果检验表明，地缘政治风险对无数子时期的套利交易回报和波动性都具有显著的样本内预测能力，而在存在不稳定性的情况下，标准常数参数技术无法捕获这些预测能力。总体而言，我们的实证结果表明，全球投资者在金砖国家建立套息交易头寸时，应考虑地缘政治风险敞口，以分散风险。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Economic Systems ECONOMICS-

CiteScore

4.90

自引率

0.00%

发文量

审稿时长

48 days

期刊介绍： Economic Systems is a refereed journal for the analysis of causes and consequences of the significant institutional variety prevailing among developed, developing, and emerging economies, as well as attempts at and proposals for their reform. The journal is open to micro and macro contributions, theoretical as well as empirical, the latter to analyze related topics against the background of country or region-specific experiences. In this respect, Economic Systems retains its long standing interest in the emerging economies of Central and Eastern Europe and other former transition economies, but also encourages contributions that cover any part of the world, including Asia, Latin America, the Middle East, or Africa.