Anyone interested in open economy finance should mosy on up to NUI, Maynooth and check this workshop out, on Dec 10-12, 2008. Details are below the fold.
The workshop is a series of lectures by the LSE's Stéphane Guibaud on finance and financial markets, in particular, he'll be talking about asset pricing in open economy macroeconomies from a general equilibrium perspective. Well worth any theorists time heading up there.
The Department of Economics, Finance and Accounting at NUI Maynooth is pleased to invite faculty, doctoral students and research practitioners throughout Ireland to a series of presentations on current research themes in international capital markets. Attendance is free, but prior notification of your attendance is required. Please contact Maire Adderley at maire.adderley@nuim.ie to reserve a seat.
Visiting Research Fellow
Stéphane Guibaud (Lecturer in Finance, London School of Economics) is visiting NUI Maynooth to present a series of faculty-doctoral workshops on international capital markets. Dr. Guibaud received his Ph.D. from Paris School of Economics in 2005 then served as post-doctoral fellow at Princeton University in 2005-2006, before joining the LSE faculty in 2006. His research focuses on general equilibrium models of international capital markets, and empirical tests of those models.
Wednesday December 10th: 2:00 – 3:30 p.m.
The Home Bias and International Asset Pricing Models
Over the last decades, major obstacles to cross-border portfolio investment have been lifted and cross-border equity holdings have surged. However, there is still widespread evidence of substantial home bias in portfolios. This begs two questions: (1) What are the frictions at play? (2) What are their implications for asset prices? I will review models of home bias and some findings in the empirical international asset pricing literature, arguing that a convincing model able to account both for portfolios and asset prices is still wanted.
Thursday December 11th: 12:00 – 1:30 p.m.
Empirical and Theoretical Characteristics of Currency Returns
The literature on currency returns is somewhat fragmented. The literature on the failure of uncovered interest rate parity (the so-called “forward premium puzzle”) deals with expected currency returns. The recent literature on carry trades puts particular emphasis on skewness. The literature on currency hedging and research on the FX price impact of portfolio rebalancing mostly focus on co-movements between currencies and other asset returns. I will review the evidence on those three aspects of currency returns and will discuss theoretical attempts to account for the evidence in an integrated framework.
Friday December 12th, 2:00 p.m. – 3:30 p.m., Room 61 Rhetoric House
A Tale of Two Frictions: Endogenous Borrowing Constraints with Trade Costs
This paper analyzes how trade costs affect country debt capacity and international risk-sharing. I consider a model of a two-country endowment economy featuring shipping costs and endogenous borrowing constraints induced by default risk. In a recursive contract framework, I analyze how these two features jointly determine country external imbalances and international risk-sharing. I show that the borrowing constraints generated by the non-enforceability of contracts endogenously become looser as trade costs decrease, which amplifies the impact of trade integration on risk-sharing. I also show that in the absence of aggregate uncertainty, trade costs and borrowing constraints are observationally equivalent. However, in the presence of aggregate uncertainty, I suggest a way to disentangle the two frictions.