Foreign currency returns and systematic risks

Atanasov, Victoria ; Nitschka, Thomas

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URN: urn:nbn:de:bsz:180-madoc-438285
Document Type: Article
Year of publication: 2015
The title of a journal, publication series: Journal of Financial and Quantitative Analysis : JFQA
Volume: 50
Issue number: 1/2
Page range: 231-250
Place of publication: Washington, DC
Publishing house: Cambridge University Press
ISSN: 0022-1090 , 1756-6916
Publication language: English
Institution: Business School > ABWL u. Finanzierung (Theissen)
Subject: 330 Economics
Abstract: 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.

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Atanasov, Victoria ; Nitschka, Thomas (2015) Foreign currency returns and systematic risks. Open Access Journal of Financial and Quantitative Analysis : JFQA Washington, DC 50 1/2 231-250 [Article]

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