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Aggregate consumption growth risk explains why low interest rate currencies do not appreciate as much as the interest rate differential and why high interest rate currencies do not depreciate as much as the interest rate differential. Domestic investors earn negative excess returns on low...
Persistent link: https://www.econbiz.de/10013069104
The U.S. consumption growth beta of an investment strategy that goes long in high interest rate currencies and short in low interest rate currencies is large and significant. The price of consumption risk is significantly different from zero, even after accounting for the sampling uncertainty...
Persistent link: https://www.econbiz.de/10013069196
Persistent link: https://www.econbiz.de/10010188876
Persistent link: https://www.econbiz.de/10009577601
"To measure the wealth-consumption ratio, we estimate an exponentially affine model of the stochastic discount factor on bond yields and stock returns. We use that discount factor to compute the no-arbitrage price of a claim to aggregate US consumption. Our estimates indicate that total wealth...
Persistent link: https://www.econbiz.de/10003689909
"We find that the US consumption growth beta of an investment strategy that goes long in high interest rate currencies and short in low interest rate currencies is larger than one. These consumption beta estimates are statistically significant, contrary to what is claimed by Burnside (2007)....
Persistent link: https://www.econbiz.de/10003659461
We set up an exponentially affine stochastic discount factor model for bond yields and stock returns in order to estimate the prices of aggregate risk. We use the estimated risk prices to compute the no-arbitrage price of a claim to aggregate consumption. The price-dividend ratio of this claim...
Persistent link: https://www.econbiz.de/10012464751
The U.S. consumption growth beta of an investment strategy that goes long in high interest rate currencies and short in low interest rate currencies is large and significant. The price of consumption risk is significantly different from zero, even after accounting for the sampling uncertainty...
Persistent link: https://www.econbiz.de/10012464835
We set up an exponentially affine stochastic discount factor model for bond yields and stock returns in order to estimate the prices of aggregate risk. We use the estimated risk prices to compute the no-arbitrage price of a claim to aggregate consumption. The price-dividend ratio of this claim...
Persistent link: https://www.econbiz.de/10012759441
The U.S. consumption growth beta of an investment strategy that goes long in high interest rate currencies and short in low interest rate currencies is large and significant. The price of consumption risk is significantly different from zero, even after accounting for the sampling uncertainty...
Persistent link: https://www.econbiz.de/10012759517