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Board of Governors of the Federal Reserve System (U.S.)
International Finance Discussion Papers
Reversals in Global Market Integration and Funding Liquidity
This paper looks at the reversals in global financial integration through the funding liquidity lens. First, we construct a segmentation indicator based on differences in funding liquidity across countries as measured by the performance of betting-against-beta strategies. Second, we find that funding liquidity shocks help explain recent reversals in integration in the absence of explicit foreign investment barriers. These findings are consistent with tighter limits to arbitrage and increased home bias during funding distress periods. Our empirical analysis is guided by a margin-CAPM model generalized to an international setting.
Cite this item
Amir Akbari & Francesca Carrieri & Aytek Malkhozov, Reversals in Global Market Integration and Funding Liquidity, Board of Governors of the Federal Reserve System (U.S.), International Finance Discussion Papers 1202, Mar 2017.
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
- G01 - Financial Economics - - General - - - Financial Crises
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
Keywords: International Finance ; Market Segmentation ; Integration Reversals ; Funding Liquidity
This item with handle RePEc:fip:fedgif:1202
is also listed on EconPapers
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