Is There a Dollar Risk Factor?

23 Pages Posted: 4 Nov 2018

See all articles by Jacob Boudoukh

Jacob Boudoukh

Interdisciplinary Center (IDC) Herzliyah; AQR Capital Management, LLC

Matthew P. Richardson

New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER); AQR Capital Management, LLC

Ashwin K Thapar

AQR Capital Management, LLC

Franklin Wang

AQR Capital Management, LLC

Date Written: October 12, 2018

Abstract

Verdelhan (2018) argues that the dollar HML factor (long high dollar beta currencies and short low dollar beta currencies) is a priced global risk factor beyond carry. In contrast, we document that the dollar HML factor does not explain the cross section of currency risk premia, is conditionally correlated to the carry factor and does not have unconditional alpha over carry. Moreover, the dollar factor does not account for significant variation in exchange rate movements in non-dollar bilateral exchange rates.

Keywords: Exchange Rates, Dollar, Carry, Factor

JEL Classification: G12, G15

Suggested Citation

Boudoukh, Jacob and Richardson, Matthew P. and Thapar, Ashwin K and Wang, Franklin, Is There a Dollar Risk Factor? (October 12, 2018). Available at SSRN: https://ssrn.com/abstract=3265394 or http://dx.doi.org/10.2139/ssrn.3265394

Jacob Boudoukh (Contact Author)

Interdisciplinary Center (IDC) Herzliyah ( email )

P.O. Box 167
Herzliya, 46150
Israel

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

Matthew P. Richardson

New York University (NYU) - Department of Finance ( email )

44 West 4th Street
Suite 9-190
New York, NY 10012-1126
United States
212-998-0349 (Phone)
212-995-4233 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

Ashwin K Thapar

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

Franklin Wang

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

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