U.S. Populism and Currency Risk Premia

75 Pages Posted: 19 Jun 2020 Last revised: 13 Jul 2023

See all articles by Ilias Filippou

Ilias Filippou

Washington University in St. Louis - John M. Olin Business School

Arie Eskenazi Gozluklu

University of Warwick - Finance Group

My T. Nguyen

Washington University in St Louis, John M. Olin Business School

Mark P. Taylor

Washington University in St. Louis - John M. Olin Business School; Centre for Economic Policy Research (CEPR); Brookings Institution

Multiple version iconThere are 2 versions of this paper

Date Written: May 26, 2020

Abstract

We develop a novel measure of media attention to U.S. populism by extending an existing populist dictionary to capture the new form of populism. Our Aggregate Populist Rhetoric (APR) Index spikes around well-known events that spur populist sentiment, and exposure to APR is linked to financial globalization. We show that the APR Index is priced in the cross-section of currency excess returns. Currencies that perform well (badly) when attention to U.S. populism is high yield low (high) expected excess returns. Investors require a risk premium for holding currencies that underperform in times of rising attention to U.S. populism. Financial segmentation explains why friction to globalization in the form of populism affects the cross-section of currency returns.

Keywords: Populism, Foreign Exchange market, Textual Analysis

JEL Classification: G11, G12, G14, G32

Suggested Citation

Filippou, Ilias and Gozluklu, Arie Eskenazi and T. Nguyen, My and Taylor, Mark P., U.S. Populism and Currency Risk Premia (May 26, 2020). WBS Finance Group Research Paper, Available at SSRN: https://ssrn.com/abstract=3610518 or http://dx.doi.org/10.2139/ssrn.3610518

Ilias Filippou (Contact Author)

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

Arie Eskenazi Gozluklu

University of Warwick - Finance Group ( email )

Warwick Business School
Coventry, CV4 7AL
Great Britain

HOME PAGE: http://www.ariegozluklu.com

My T. Nguyen

Washington University in St Louis, John M. Olin Business School ( email )

Room 274 Simon Hall
Washington University in St. Louis
St. Louis, MO 63130
United States
6188183228 (Phone)

Mark P. Taylor

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1156
St. Louis, MO 63130-4899
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Brookings Institution ( email )

1775 Massachusetts Ave, NW
Washington, DC 20036
United States

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