Exchange Rate Fluctuations and International Portfolio Rebalancing in Thailand

20 Pages Posted: 1 Nov 2012

See all articles by Jacob Gyntelberg

Jacob Gyntelberg

Nordea Group; University of Copenhagen - Department of Economics

Mico Loretan

Swiss National Bank

Subhanij Tientip

affiliation not provided to SSRN

Date Written: August 2012

Abstract

We present empirical evidence that the Thai baht’s value is driven in part by investors’ cross-border equity portfolio rebalancing decisions. Our results are based on comprehensive datasets of FX and stock market transactions undertaken by nonresident investors in Thailand in 2005 and 2006. Higher returns in the stock market relative to a reference stock market are associated with net sales of equities by these investors and a depreciation of the Thai baht. Net purchases of Thai equities lead to an appreciation of the Thai baht. Foreign investors do not appear to hedge the foreign exchange risk related to their stock market positions.

Keywords: Capital Flows, Equity Market, Portfolio Rebalancing, Exchange Rates, Stock Markets, Exchange Rate Appreciation

Suggested Citation

Gyntelberg, Jacob and Loretan, Mico and Tientip, Subhanij, Exchange Rate Fluctuations and International Portfolio Rebalancing in Thailand (August 2012). IMF Working Paper No. 12/214. Available at SSRN: https://ssrn.com/abstract=2169759

Jacob Gyntelberg (Contact Author)

Nordea Group ( email )

Grønjordsvej 10
Copenhagen, DK - 2300
Denmark

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5, Bygn 26
Copenhagen, 1353
Denmark

Mico Loretan

Swiss National Bank ( email )

Fraumuensterstr. 8
Zuerich, 8022
Switzerland

Subhanij Tientip

affiliation not provided to SSRN

No Address Available

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