Study on the Nonlinear Effect of Exchange Rate Volatility on the NAV of Oversea Investment Funds – Stock Fund vs. Bond Fund

• Main Authors: Mei-Chi Chang, 張美琪
• Other Authors: Chien-Chung Nieh
• Format: Others
• Language: zh-TW
• Published: 2011
• Online Access: http://ndltd.ncl.edu.tw/handle/95200768021915378544

碩士 === 淡江大學 === 全球華商經營管理數位學習碩士在職專班 === 99 === This study applies panel smooth transition regression model to investigate the effect of exchange rate variation on the net asset values (NAV) of two kinds of oversea fund, stock and bond, respectively. The variables used in our empirical analysis include not only the explained variable of NAV of oversea funds and the smooth transition variable of exchange rate variance, but the explanatory variables of fund size, number of beneficiary, dollar amount of buying and dollar amount of selling as the control variables considered in this research. We first conclude from the empirical result that all the variables considered in our research are I(0) stationary series. Besides, the linear test and model specification for oversea stock and bond funds are specified as m=1 and r=1 and m=2 and r=1, respectively. The parameter estimation of panel smooth transition model shows that when the exchange rate level is well below the threshold value, oversea stock fund is positively affected by fund size, dollar amount of buying and dollar amount of selling and negatively affected by the number of beneficiary. However, when the exchange rate level is above the threshold value, oversea stock fund is positively affected by fund size only and negatively affected by the number of beneficiary, dollar amount of buying and dollar amount of selling. The finding offers some suggestions to investors that setting up the investment strategies as buying oversea stock fund with larger fund size, less number of beneficiary or more liquidity under the lower exchange rate regime. On the other hand, investors should buy the oversea stock fund with larger fund size, less number of beneficiary or less liquidity under the higher exchange rate regime Nonetheless, regarding to the oversea bond fund, the testing result shows it is positively affected by fund size, the number of beneficiary and dollar amount of selling and negatively affected by dollar amount of buying when exchange rate level is around the threshold value. However, when the exchange rate level is away from it’s threshold value, oversea bond fund is positively affected by fund size, the number of beneficiary and negatively affected by dollar amount of buying and dollar amount of selling. This implies that investors should buy oversea bond fund with larger fund size and higher number of beneficiary when exchange rate level is around the threshold value. When exchange rate level is away from the threshold value, investors should buy bond fund with larger fund size, higher number of beneficiary or less liquidity. We believe that the result of this study can be used as the bench mark for future investment strategy.