Since Roll (The Journal of Finance 47(1):3-41, 1992) and Heston and Rouwenhorst (Journal of Financial Economics 36:3-27, 1994), there has been a debate whether country factors in international stock returns are typically more variable than sector factors. The addition of emerging markets (EMs)...

We conjecture that the forward puzzle may reflect career risks: when professional investors observe public danger signals about a currency, they require a premium for holding it. We find evidence of this in ERM rates. As deep discounts do signal danger, we next specify nonlinear variants of the...