We apply an empirical approximation of the intertemporal capital asset pricing model
(ICAPM) to show that cross-sectional dispersion in currency returns can be rationalized
by differences in currency excess returns’ sensitivities to the market return’s cash-flow news component. This finding echoes recent explanations of the value and growth stock
market anomaly. The distinction between cash-flow news and discount-rate news is key to
jointly explain average stock and currency returns. Our analysis reveals the presence of a
common source of systematic risk in stock and foreign currency returns that is reflected in
the market return’s cash-flow news component.
Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.
Dieser Datensatz wurde nicht während einer Tätigkeit an der Universität Mannheim veröffentlicht, dies ist eine Externe Publikation.
Search Authors in