We develop a novel method to dynamically hedge foreign exchange exposure in international equity and bond portfolios. The method exploits the time-series predictability of currency returns, which we show emerges from exploiting a forecastable component in global factor returns. The hedging...

We investigate the information contained in foreign exchange (FX) volume using a novel dataset from the over-the-counter market. We find volume helps predict next day currency returns and is economically valuable for currency investors. Predictability implies a stronger currency return reversal...

We show that a global imbalance risk factor that captures the spread in countries' external imbalances and their propensity to issue external liabilities in foreign currency explains the cross-sectional variation in currency excess returns. The economic intuition is simple: net debtor countries...

We undertake the first comprehensive investigation into the use of currency forwards at international equity mutual funds. Using a unique hand-collected dataset spanning 15-years and over 1,200 US mutual funds, we identify three distinct approaches to using currency forwards that span liquidity,...