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We investigate the relation between global FX volatility and the excess returns to carry trade portfolios. We find a significantly negative return co-movement of high interest rate currencies with global volatility, whereas low interest rate currencies provide a hedge against volatility shocks....
Persistent link: https://www.econbiz.de/10015216553
This draft is a summary of the paper entitled: Forecasting Fuel Prices with the Chilean Exchange Rate. In that paper we show that the Chilean exchange rate has the ability to predict the returns of oil prices and of three additional oil-related products: gasoline, propane and heating oil. The...
Persistent link: https://www.econbiz.de/10015229382
The uncovered interest rate parity does not hold in the foreign exchange market (UIP puzzle). I use the cross-country variance risk premium differential to measure the excess foreign exchange return. Consequently, similar to Bansal and Shaliastovich (2010), I provide a risk-based explanation for...
Persistent link: https://www.econbiz.de/10015233433
Recent studies show that carry trade returns are predictable and this predictability reflects changes in expected returns. Changes in expected returns may be related to time variation in betas and risk prices. We investigate this issue in carry trades and find clear evidence of time-varying risk...
Persistent link: https://www.econbiz.de/10015257149
This paper investigates the importance of commodity prices to the returns of currency carry trade portfolios. We adopt a recently developed empirical factor model to capture commodity commonalities and heterogeneity. Agricultural material and metal price risk factors are found to have...
Persistent link: https://www.econbiz.de/10015257150
In this paper we show that the Chilean exchange rate has the ability to predict the returns of the London Metal Exchange Index and of the six primary non-ferrous metals that are part of the index: aluminum, copper, lead, nickel, tin and zinc. The economic relationship hinges on the present-value...
Persistent link: https://www.econbiz.de/10015258752
This paper examines factors that influence prices of most common five cryptocurrencies such Bitcoin, Ethereum, Dash, Litecoin, and Monero over 2010-2018 using weekly data. The study employs ARDL technique and documents several findings. First, cryptomarket-related factors such as market beta,...
Persistent link: https://www.econbiz.de/10015259534
This study investigates the sensitivity of stock returns at the industry level to market, exchange rate and interest rate shocks in the four major European economies: France, Germany, Italy and the UK. In addition to exposure to the market, significant levels of exposure to both exchange rate...
Persistent link: https://www.econbiz.de/10015265529
This paper assesses the extent to which carry trade operations affect the performance of equity and bond markets in a target country, South Africa, by considering the US and euro area as the funding countries. A two- and three-factor capital asset pricing model (CAPM) is employed to assess...
Persistent link: https://www.econbiz.de/10015266492
This paper assesses the extent of exchange rate risk pricing in emerging and developed economies to infer whether this risk is systematic or unsystematic in these economies. The pricing of this risk is based on the two- and three-factor extended CAPM (capital asset pricing model). The US and...
Persistent link: https://www.econbiz.de/10015267089