Equity flows, stock returns and exchange rates

Abstract

We explore the effects of equity flows between U.S. and U.K. investors upon equity and exchange rate returns within a unified empirical framework on the basis of a trivariate vector autoregressive system that incorporates mean and volatility spillovers and allows for dynamic conditional correlations. Our findings are as follows: First, we reveal strong evidence of volatility spillovers across equity returns, exchange rate returns, and equity flows. Second, we find strong evidence that U.K. investors rebalance their portfolios by engaging in a positive feedback trading known in the literature as "trend chasing." Third, we document strong dynamic effects from net flows to equity returns, illustrating a trading rule that portfolios are dynamically adjusted over a short-run horizon influencing changes in stock returns. Last, correlation uncertainty appears to be reduced from the start of the 1990s onwards.

Nexuses between Economic Factors and Stock Returns in China

“…In short run investor cannot reimburse from inflation but in long run can be compensated. Kanas and Karkalakos (2017) explored the effects of equity flows between U.S. and U.K. investors upon equity and exchange rate returns within a unified empirical framework on the basis of a trivariate vector autoregressive system that incorporates mean and volatility spillovers and allows for dynamic conditional correlations. They pointed out that volatility spillovers across equity returns, exchange rate returns, and equity flows.…”

Nexus between Remittance, Nonperforming Loan, Money Supply, and Financial Volatility: An Application of ARDL

“…By considering these two, there is a positive effect on stock price in China whereas there is the negative significance of interest rate on stock return. Kanas and Karkalakos (2017) USA UK The finding of this study exposes volatility spillovers across equity return, exchange rate, and equity flows. Phiri (2017) South Africa This study reveals a negative relationship between inflation and stock market return, which means investors of South Africa stock market are unable to protect them from rising inflation that affects the stock price.…”

Do All Eagles Fly High? The Generic Overgeneralization Effect: The Impact of Fillers in Truth Value Judgment Tasks

“…As argued by Leslie (2007), generics are more fundamental to cognition and are also easier to master for children (Gelman, 2003). The generics-as-default hypothesis has received some empirical evidence from the research on children and adults who sometimes treat universally quantified statements with all as generics (Hollander et al, 2002;Khemlani et al, 2007). As mentioned in the introduction, the phenomenon has been named the GOG effect and is defined as "overgeneralizing from the truth of a generic to the truth of the corresponding universal statement" (Leslie et al, 2011, p. 17).…”

“…Thus, if people believe that the statement lions have manes is true, they will tend to accept a quantified statement such as all lions have manes, because resorting to a default operation saves cognitive effort. It is claimed that the scope of the GOG effect is limited (Khemlani et al, 2007) but it might affect statements with principled connections such as majority characteristic universal statements (all eagles fly high) and minority characteristic universal statements (all lions have manes). The hypothesized GOG effect is claimed to provide evidence for the generics-asdefault hypothesis (Leslie et al, 2011).…”

“…From a logical standpoint, universal quantified generalizations such as all eagles fly high or all snakes lay eggs should be considered false because the quantifier all does not allow exceptions. Empirical data, however, show that both children and adults at times treat quantified generalizations with all as if they were generic statements (e.g., Hollander, Gelman, & Star, 2002;Khemlani, Leslie, Glucksberg, & Fernandez, 2007). Leslie, Khemlani, & Glucksberg (2011) term this phenomenon "the generic overgeneralization (GOG) effect" and attribute it to a cognitive tendency that prompts people to overgeneralize from the truth of a generic to the truth of a corresponding universal statement.…”