Optimal N-state endogenous Markov-switching model for currency liquidity timing
研究全球分散化基金是否根据系统性货币流动性变化主动调整货币敞口（货币流动性择时），提出嵌入N状态内生马尔可夫转换机制的新模型，发现基金在平静期反向择时、动荡期正向择时，且状态转换受外部市场流动性和内部基金回报冲击驱动。
In this paper, we examine whether globally-diversified funds' actively adjust their currency exposure in response to systematic currency liquidity movements, a behavior we term currency liquidity timing . A novel currency-liquidity-timing model embedded with an N -state endogenous Markov-switching mechanism is proposed to capture the dynamics in funds' timing behavior, as well as the external and internal drivers influencing such dynamics. Using a sample of 382 international fixed income mutual funds from July 2001 to December 2020, we find evidence of currency liquidity timing at the aggregate level for the sample funds. Interestingly, funds' currency-liquidity-timing behavior exhibits a state-switching pattern across different market periods: funds on average engage in perverse currency liquidity timing during tranquil market periods, but in positive currency liquidity timing with a stronger degree of aggressivity during more turbulent market periods. Our results suggest that the state transitions in funds' currency-liquidity-timing behavior are driven by deteriorating external currency market liquidity conditions and negative shocks to internal fund returns.