|
|
|
|
||||
|
||||
The Cross-Section of Foreign Currency Risk Premia and Consumption Growth RiskHanno N. LustigUCLA - Anderson School of Management; National Bureau of Economic Research (NBER) Adrien VerdelhanMassachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER) August 1, 2006 Banque de France Working Paper No. NER-R 155 Abstract: Aggregate consumption growth risk explains why low interest rate currencies do not appreciate as much as the interest rate differential and why high interest rate currencies do not depreciate as much as the interest rate differential. Domestic investors earn negative excess returns on low interest rate currency portfolios and positive excess returns on high interest rate currency portfolios. Because high interest rate currencies depreciate on average when domestic consumption growth is low and low interest rate currencies appreciate under the same conditions, low interest rate currencies provide domestic investors with a hedge against domestic aggregate consumption growth risk.
Number of Pages in PDF File: 62 Keywords: Exchange Rates, Asset Pricing JEL Classification: F31, G12 working papers seriesDate posted: October 25, 2010Suggested CitationContact Information
|
|
|||||||||||||||||||||||
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
FAQ
Terms of Use
Privacy Policy
Copyright
This page was processed by apollo6 in 0.453 seconds
