Abstract

http://ssrn.com/abstract=1930516
 
 

References (93)



 
 

Citations (6)



 


 



The Share of Systematic Variation in Bilateral Exchange Rates


Adrien Verdelhan


Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

July 2015

AFA 2013 San Diego Meetings Paper

Abstract:     
Sorting countries by their dollar currency betas produces a novel cross-section of average currency excess returns. A slope factor (long in high beta currencies and short in low beta currencies) accounts for this cross-section of currency risk premia. This slope factor is orthogonal to the high-minus-low carry trade factor built from portfolios of countries sorted by their interest rates. The two high-minus-low risk factors account for 18% to 80% of the monthly exchange rate movements. The two risk factors suggest that stochastic discount factors in complete markets' models should feature at least two global shocks to describe exchange rates.

Number of Pages in PDF File: 86

Keywords: exchange rates, forward premium puzzle, risk premium

JEL Classification: F31


Open PDF in Browser Download This Paper

Date posted: September 19, 2011 ; Last revised: July 24, 2015

Suggested Citation

Verdelhan, Adrien, The Share of Systematic Variation in Bilateral Exchange Rates (July 2015). AFA 2013 San Diego Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1930516 or http://dx.doi.org/10.2139/ssrn.1930516

Contact Information

Adrien Verdelhan (Contact Author)
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
77 Massachusetts Ave.
E62-416
Cambridge, MA 02142
United States
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Feedback to SSRN


Paper statistics
Abstract Views: 3,277
Downloads: 1,150
Download Rank: 10,395
References:  93
Citations:  6

© 2015 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo4 in 0.282 seconds