Open AccessExchange Rates and Asset Prices: Heterogeneous Agents at Work
Author(s) -
Giulia Piccillo
Publication year - 2009
Publication title -
ssrn electronic journal
Language(s) - English
Resource type - Journals
ISSN - 1556-5068
DOI - 10.2139/ssrn.1360645
Subject(s) - asset (computer security) , business , work (physics) , financial economics , monetary economics , economics , computer science , computer security , engineering , mechanical engineering
This paper studies the relationship between exchange rates and asset prices. It takes the novel approach of modeling both the markets in a framework of heterogeneous agents. Investors maximize their prots from the international equity markets by solving a Mean-Variance problem. As a result, agents choose between dierent combinations of rules in the home and foreign equity market as well as in the foreign exchange market. Given
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