Católica Lisbon School of Business & Economics
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Browsing Católica Lisbon School of Business & Economics by advisor "Albuquerque, Rui André Pinto de"
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- Does funding liquidity help predict U.S Dollar returns?Publication . Rodrigues, Pedro Themido Pereira; Albuquerque, Rui André Pinto dePredicting the future value of an exchange rate has been a long-standing challenge in economics. There is still no evidence of any model or technique that has consistently been proven to beat the random walk model. The current objective of this thesis is to check if there is a liquidity channel tied to banking funding that allows us to explain some part of the performance of currency returns. The present analysis focuses on the paper “Risk Appetite and Exchange Rates” by Adrian et al. (2015) where it is claimed that there is a statistically significant relationship between banks’ funding capacities and changes in exchange rates. This relation seems to be more prominent for currencies of more developed countries. In my analysis, the liquidity aggregates (Commercial Paper and Repo) also display some explanatory power, though less than in Adrian et al. Importantly, however, I show that using linear time de-trending as the authors do presents stationarity problems for both liquidity aggregates, especially for Repo volume. The statistical inference of the OLS results is therefore limited. Moreover, in the fitted models, adding a dummy variable and a dummy variable with interactions with the two liquidity aggregates, as in Adrian et al. (2015), reduces the individual significance of the coefficients’ estimates for the liquidity variables. Overall, my analysis casts doubt on the results obtained in Adrian et al. (2015).
- Which factors drive shadow banking? : an empirical studyPublication . Alhusen, Sophia Barbara; Albuquerque, Rui André Pinto de; Østergaard, CharlotteThis thesis is an empirical analysis of the factors that drive the size of the shadow banking sector. Shadow banking, in this analysis, uses the flow of fund measure. Two-way fixed-effects panel regression for a cross section of 26 jurisdictions reveals that shadow banking in emerging and developed markets is driven by different factors. In emerging countries, the growth in shadow banking is mainly associated with increased demand of institutional investors for low risk, high yield investments. In developed countries, the size of shadow banking is related with the state of the traditional banking system. The explanatory power of these variables was much greater before the Financial Crisis of 2007/2008 than after, which could be explained by tighter regulation and related changes in the shadow banking sector.