Common risk factors in currency markets:
"Currency excess returns are highly predictable, more than stock returns, and about as much as bond returns. In addition, these predicted excess returns are strongly counter-cyclical. The average excess returns on low interest rate currencies are 4.8 percent per annum smaller than those on high...
Gespeichert in:
| Beteiligte Personen: | , , |
|---|---|
| Format: | Buch |
| Sprache: | Englisch |
| Veröffentlicht: |
Cambridge, Mass.
National Bureau of Economic Research
2008
|
| Schriftenreihe: | Working paper series / National Bureau of Economic Research
14082 |
| Links: | http://papers.nber.org/papers/w14082.pdf |
| Zusammenfassung: | "Currency excess returns are highly predictable, more than stock returns, and about as much as bond returns. In addition, these predicted excess returns are strongly counter-cyclical. The average excess returns on low interest rate currencies are 4.8 percent per annum smaller than those on high interest rate currencies after accounting for transaction costs. We show that a single return-based factor, the return on the highest minus the return on the lowest interest rate currency portfolios, explains the cross-sectional variation in average currency excess returns from low to high interest rate currencies. This evidence suggests currency risk premia are large and time-varying. In a simple affine pricing model, we show that the high-minus-low currency return measures the component of the stochastic discount factor innovations that is common across countries. To match the carry trade returns in the data, low interest rate currencies need to load more on this common innovation when the market price of global risk is high"--National Bureau of Economic Research web site |
| Umfang: | 54 S. graph. Darst. 22 cm |
Internformat
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| 245 | 1 | 0 | |a Common risk factors in currency markets |c Hanno Lustig ; Nikolai Roussanov ; Adrien Verdelhan |
| 264 | 1 | |a Cambridge, Mass. |b National Bureau of Economic Research |c 2008 | |
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| 490 | 1 | |a Working paper series / National Bureau of Economic Research |v 14082 | |
| 520 | 8 | |a "Currency excess returns are highly predictable, more than stock returns, and about as much as bond returns. In addition, these predicted excess returns are strongly counter-cyclical. The average excess returns on low interest rate currencies are 4.8 percent per annum smaller than those on high interest rate currencies after accounting for transaction costs. We show that a single return-based factor, the return on the highest minus the return on the lowest interest rate currency portfolios, explains the cross-sectional variation in average currency excess returns from low to high interest rate currencies. This evidence suggests currency risk premia are large and time-varying. In a simple affine pricing model, we show that the high-minus-low currency return measures the component of the stochastic discount factor innovations that is common across countries. To match the carry trade returns in the data, low interest rate currencies need to load more on this common innovation when the market price of global risk is high"--National Bureau of Economic Research web site | |
| 700 | 1 | |a Roussanov, Nikolai |e Verfasser |0 (DE-588)134265653 |4 aut | |
| 700 | 1 | |a Verdelhan, Adrien |d 1971- |e Verfasser |0 (DE-588)130456799 |4 aut | |
| 776 | 0 | 8 | |i Erscheint auch als |n Online-Ausgabe |
| 810 | 2 | |a National Bureau of Economic Research <Cambridge, Mass.> |t NBER working paper series |v 14082 |w (DE-604)BV002801238 |9 14082 | |
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| author | Lustig, Hanno Roussanov, Nikolai Verdelhan, Adrien 1971- |
| author_GND | (DE-588)124560040 (DE-588)134265653 (DE-588)130456799 |
| author_facet | Lustig, Hanno Roussanov, Nikolai Verdelhan, Adrien 1971- |
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| id | DE-604.BV023593963 |
| illustrated | Illustrated |
| indexdate | 2024-12-20T13:23:21Z |
| institution | BVB |
| language | English |
| oai_aleph_id | oai:aleph.bib-bvb.de:BVB01-016909293 |
| oclc_num | 255133102 |
| open_access_boolean | 1 |
| owner | DE-521 |
| owner_facet | DE-521 |
| physical | 54 S. graph. Darst. 22 cm |
| publishDate | 2008 |
| publishDateSearch | 2008 |
| publishDateSort | 2008 |
| publisher | National Bureau of Economic Research |
| record_format | marc |
| series2 | Working paper series / National Bureau of Economic Research |
| spelling | Lustig, Hanno Verfasser (DE-588)124560040 aut Common risk factors in currency markets Hanno Lustig ; Nikolai Roussanov ; Adrien Verdelhan Cambridge, Mass. National Bureau of Economic Research 2008 54 S. graph. Darst. 22 cm txt rdacontent n rdamedia nc rdacarrier Working paper series / National Bureau of Economic Research 14082 "Currency excess returns are highly predictable, more than stock returns, and about as much as bond returns. In addition, these predicted excess returns are strongly counter-cyclical. The average excess returns on low interest rate currencies are 4.8 percent per annum smaller than those on high interest rate currencies after accounting for transaction costs. We show that a single return-based factor, the return on the highest minus the return on the lowest interest rate currency portfolios, explains the cross-sectional variation in average currency excess returns from low to high interest rate currencies. This evidence suggests currency risk premia are large and time-varying. In a simple affine pricing model, we show that the high-minus-low currency return measures the component of the stochastic discount factor innovations that is common across countries. To match the carry trade returns in the data, low interest rate currencies need to load more on this common innovation when the market price of global risk is high"--National Bureau of Economic Research web site Roussanov, Nikolai Verfasser (DE-588)134265653 aut Verdelhan, Adrien 1971- Verfasser (DE-588)130456799 aut Erscheint auch als Online-Ausgabe National Bureau of Economic Research <Cambridge, Mass.> NBER working paper series 14082 (DE-604)BV002801238 14082 http://papers.nber.org/papers/w14082.pdf kostenfrei Volltext |
| spellingShingle | Lustig, Hanno Roussanov, Nikolai Verdelhan, Adrien 1971- Common risk factors in currency markets |
| title | Common risk factors in currency markets |
| title_auth | Common risk factors in currency markets |
| title_exact_search | Common risk factors in currency markets |
| title_full | Common risk factors in currency markets Hanno Lustig ; Nikolai Roussanov ; Adrien Verdelhan |
| title_fullStr | Common risk factors in currency markets Hanno Lustig ; Nikolai Roussanov ; Adrien Verdelhan |
| title_full_unstemmed | Common risk factors in currency markets Hanno Lustig ; Nikolai Roussanov ; Adrien Verdelhan |
| title_short | Common risk factors in currency markets |
| title_sort | common risk factors in currency markets |
| url | http://papers.nber.org/papers/w14082.pdf |
| volume_link | (DE-604)BV002801238 |
| work_keys_str_mv | AT lustighanno commonriskfactorsincurrencymarkets AT roussanovnikolai commonriskfactorsincurrencymarkets AT verdelhanadrien commonriskfactorsincurrencymarkets |