On Forward-Looking Exchange Rates and Commodity Prices
20 Pages Posted: 9 Mar 2009 Last revised: 19 Mar 2009
Date Written: March 18, 2009
Abstract
This paper ties together recent literature on the forecastability of commodity prices and exchange rates using insights from the study of leveraged financial institutions. I exhibit evidence that the Chen, Rogoff and Rossi (2008) quarterly predictability of commodity returns by changes in exchange rates may be driven by fluctuations in financial intermediary risk appetite, which forecast both commodity returns and exchange rates.
Keywords: asset pricing, financial intermediaries, exchange rates, commodity prices, forecasting, risk appetite
JEL Classification: C52, C53, F31, F47, G12, G13, G24
Suggested Citation: Suggested Citation
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