Lustig, Hanno; Verdelhan, Adrien - In: Journal of the European Economic Association 4 (2006) 2-3, pp. 644-655
Investors earn positive excess returns on high interest rate foreign discount bonds, because these currencies appreciate on average. Lustig and Verdelhan (2005) show that investing in high interest rate foreign discount bonds exposes them to more aggregate consumption risk, while low interest...