We use a standard consumption-based asset pricing model incorporating conditioning information to explain the risk-return profile of currency carry trade portfolios. We use a scaled stochastic discount factor instead of scaled or managed portfolio returns as in previous work. Our conditioning...

We use a standard consumption-based asset pricing model incorporating conditioning information to explain the risk-return profile of currency carry trade portfolios. We use a scaled stochastic discount factor instead of scaled or managed portfolio returns as in previous work. Our conditioning...

Economically relevant factors in asset pricing models should impound information on the future path of state variables that drive asset risk premia. Imposing this condition, we investigate which publicly available characteristics predict individual stock returns during the sample period used by...