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Intereconomics

, Volume 43, Issue 6, pp 349–358 | Cite as

The impact of sovereign wealth funds on global financial markets

  • Roland Beck
  • Michael Fidora
Articles Sovereign Wealth Funds

Abstract

If sovereign wealth funds act similarly to private investors and thus allocate foreign assets according to market capitalisation rather than liquidity considerations, official portfolios reduce their “bias” towards the major reserve currencies — the US dollar and the euro. As a result, more capital flows “downhill“ from rich to less wealthy economies. In this scenario, the euro area and the United States would be subject to net capital outflows while Japan and the emerging markets would attract net capital inflows. The potential implications of a rebalancing of international capital flows for stock prices, interest rates and exchange rates remain uncertain, however.

Keywords

Abnormal Return Euro Area Capital Asset Price Model Foreign Asset Gulf Cooperation Council 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer-Verlag 2008

Authors and Affiliations

  • Roland Beck
  • Michael Fidora
    • 1
  1. 1.European Central BankFrankfurt am MainGermany

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