Uncovered equity parity: an empirical analysis for the Brazilian financial market

• Ano de defesa: 2018
• Autor(a) principal: Zapp, Jan-Frederik
• Orientador(a): Sampaio, Joelson Oliveira
• Tipo de documento: Dissertação
• Tipo de acesso: Acesso aberto
• Idioma: eng
• Palavras-chave em Português: Dinâmica da taxa de câmbio; Fluxos de capital; Reequilíbrio de carteira; Perseguição de retorno
• Palavras-chave em Inglês: Exchange rate dynamics; Capital flows; Portfolio rebalancing; Return-chasing
• Link de acesso: http://hdl.handle.net/10438/25722

This paper analyzes if the uncovered equity parity conditions, established by Hau and Rey (2006), hold for Brazil or if divergent capital flow dynamics are observable. The paper applies a vector autoregressive model, capturing the interdependencies between local equity returns, capital flows, and currency returns. Contrary to Hau and Rey (2006), I find a positive relation between local equity returns and currency returns caused by the positive impact of local equity return shocks on foreign net capital flows. The results are in line with previous findings from emerging markets in Asia (Fuertes et al. (2017)).