U.S. Populist Rhetoric and Currency Returns

81 Pages Posted: 19 Jun 2020 Last revised: 8 Jan 2021

See all articles by Ilias Filippou

Ilias Filippou

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

Arie Eskenazi Gozluklu

University of Warwick

My T. Nguyen

University of Warwick - Warwick 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 U.S. populist rhetoric. Aggregate Populist Rhetoric (APR) Index spikes around populist events. We decompose the APR Index into sub-indices. We show that APR Index and International Relations sub-index are negatively priced in the cross-section of currency excess returns. Currencies that perform well (badly) when U.S. populist rhetoric is high yield low (high) expected excess returns. Investors require high risk premium for holding currencies which under-perform in times of rising U.S. populist rhetoric, especially in the post-crisis period. A long-short strategy that buys (sells) currencies with high (low) exposure to U.S. populism offers strong diversification benefits.

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. Populist Rhetoric and Currency Returns (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 ( email )

Gibbet Hill Rd
Coventry, CV4 7AL
Great Britain

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

My T. Nguyen

University of Warwick - Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom

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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