Currency Returns in Different Time Zones

28 Pages Posted: 4 Jun 2015 Last revised: 25 Jan 2019

Date Written: January 23, 2019


European currencies have positive average returns during US business hours and negative average returns during foreign business hours. I propose a risk-based explanation: Because news about US growth prospects arrives mostly during US business hours, US investors require higher risk premia to hold risky foreign currencies in these hours. Consistent with this argument, I find the difference in a currency's returns between US and foreign business hours widens if the currency has a higher risk exposure, and when its exchange rate becomes more volatile. These results connect currency returns in different time zones to currency risk premia observable at lower frequencies, and support asset pricing models with recursive preferences and long-run risks.

Keywords: Exchange Rates; Currency Risk Premia; Long-Run Risks

Suggested Citation

Jiang, Zhengyang, Currency Returns in Different Time Zones (January 23, 2019). Institute of Global Finance Working Paper No. 11, 28th Australasian Finance and Banking Conference, Available at SSRN: or

Zhengyang Jiang (Contact Author)

Kellogg School of Management - Department of Finance ( email )

Evanston, IL 60208
United States


National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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