A simple test of momentum in foreign exchange markets

This study proposes a new method for testing for the presence of momentum in nominal exchange rates, using a probabilistic approach. We illustrate our methodology estimating a binary response model using information on local currency / US dollar exchange rates of eight emerging economies. After controlling for important variables a§ecting the behavior of exchange rates in the short-run, we show evidence of exchange rate inertia; in other words, we Önd that exchange rate momentum is a common feature in this group of emerging economies, and thus foreign exchange traders participating in these markets are able to make excess returns by following technical analysis strategies. We Önd that the presence of momentum is asymmetric, being stronger in moments of currency depreciation than of appreciation. This behavior may be associated with central bank intervention.Momentum, foreign exchange markets, hazard duration analysis, emerging economies.

The cyclical behavior of bank capital buffers in an emerging economy: size do matters

Using a panel of Colombian banks and quarterly data between 1996:1 and 2010:3, we study the relationship between short-run adjustments in bank capital buffers and the business cycle. We follow a partial adjustment framework and control for several variables that have been identified as important determinants of bank capital buffers in previous studies, and find that bank capital buffers vary overthe business cycle. We are able to identify a negative co-movement of capital buffers and and the business cycle. However, we also find that capital buffers of small and large banks behave asymmetrically during the business cycle. While the former appear to be constant over time, once the appropriate set of control variables is used, the latter present a countercyclical behavior. Our results suggest the possible need of the implementation of regulatory policy measures in developing countries.Bank capital bu§ers; Credit risk; Regulation; Colombia

Revista Divulgación Científica Universidad del Rosario No. 6

Esta publicación tiene la decidida intención de acercar la investigación que realiza la Universidad del Rosario de Bogotá, Colombia, a un gran número de lectores para mostrarles, desde el periodismo científico, el quehacer investigativo de la institución.This publication has the determined intention of bringing the research carried out by the Universidad del Rosario in Bogotá, Colombia, to a large number of readers to show them, from scientific journalism, the investigative work of the institution