The cross-section of currency risk premia and US consumption growth risk:
"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. We sort foreign T-bills into portfolios based on the nomina...
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| Main Authors: | , |
|---|---|
| Format: | Book |
| Language: | English |
| Published: |
Cambridge, Mass.
National Bureau of Economic Research
2005
|
| Series: | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series
11104 |
| Subjects: | |
| Online Access: | Volltext |
| Summary: | "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. We sort foreign T-bills into portfolios based on the nominal interest rate differential with the US, and we test the Euler equation of a US investor who invests in these currency portfolios. US investors earn negative excess returns on low interest rate currency portfolios and positive excess returns on high interest rates currency portfolios. We find that low interest rate currencies provide US investors with a hedge against US aggregate consumption growth risk, because these currencies appreciate on average when US consumption growth is low, while high interest rate currencies depreciate when US consumption growth is low. As a result, the risk premia predicted by the Consumption-CAPM match the average excess returns on these currency portfolios"--National Bureau of Economic Research web site. |
| Physical Description: | 45 S. graph. Darst. |
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| spelling | Lustig, Hanno Verfasser (DE-588)124560040 aut The cross-section of currency risk premia and US consumption growth risk Hanno Lustig ; Adrien Verdelhan Cambridge, Mass. National Bureau of Economic Research 2005 45 S. graph. Darst. txt rdacontent n rdamedia nc rdacarrier National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series 11104 "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. We sort foreign T-bills into portfolios based on the nominal interest rate differential with the US, and we test the Euler equation of a US investor who invests in these currency portfolios. US investors earn negative excess returns on low interest rate currency portfolios and positive excess returns on high interest rates currency portfolios. We find that low interest rate currencies provide US investors with a hedge against US aggregate consumption growth risk, because these currencies appreciate on average when US consumption growth is low, while high interest rate currencies depreciate when US consumption growth is low. As a result, the risk premia predicted by the Consumption-CAPM match the average excess returns on these currency portfolios"--National Bureau of Economic Research web site. Ökonometrisches Modell Foreign exchange rates Econometric models Investments United States Econometric models USA Verdelhan, Adrien 1971- Verfasser (DE-588)130456799 aut Erscheint auch als Online-Ausgabe National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series 11104 (DE-604)BV002801238 11104 http://papers.nber.org/papers/w11104.pdf kostenfrei Volltext |
| spellingShingle | Lustig, Hanno Verdelhan, Adrien 1971- The cross-section of currency risk premia and US consumption growth risk National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series Ökonometrisches Modell Foreign exchange rates Econometric models Investments United States Econometric models |
| title | The cross-section of currency risk premia and US consumption growth risk |
| title_auth | The cross-section of currency risk premia and US consumption growth risk |
| title_exact_search | The cross-section of currency risk premia and US consumption growth risk |
| title_full | The cross-section of currency risk premia and US consumption growth risk Hanno Lustig ; Adrien Verdelhan |
| title_fullStr | The cross-section of currency risk premia and US consumption growth risk Hanno Lustig ; Adrien Verdelhan |
| title_full_unstemmed | The cross-section of currency risk premia and US consumption growth risk Hanno Lustig ; Adrien Verdelhan |
| title_short | The cross-section of currency risk premia and US consumption growth risk |
| title_sort | the cross section of currency risk premia and us consumption growth risk |
| topic | Ökonometrisches Modell Foreign exchange rates Econometric models Investments United States Econometric models |
| topic_facet | Ökonometrisches Modell Foreign exchange rates Econometric models Investments United States Econometric models USA |
| url | http://papers.nber.org/papers/w11104.pdf |
| volume_link | (DE-604)BV002801238 |
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