Many recent papers have investigated the role played by volatility in determining the cross-section of currency returns. This paper employs two time-varying factor models: a threshold model and a Markov-switching model to price the excess returns from the currency carry trade. We show that the...

Although, according to uncovered interest rate parity, exchange rates should move so as to prevent the carry trade being systematically profitable, there is a vast empirical literature demonstrating the opposite. High interest currencies more often tend to appreciate rather than depreciate, as...

The foreign exchange (FX) market is considered to be the largest and presumably most liquid financial market in the world. We show that even in this market exposure to liquidity risk commands a non-trivial risk premium of up to 3.6% per annum. In particular, systematic and currency-specific...

We sort currencies by countries' consumption growth over the past four quarters. Currency portfolios of countries experiencing consumption booms have higher Sharpe ratios than those of countries going through a consumption-based recession. A carry strategy that goes short in countries that are...

We present evidence of significant bias in event studies that investigate the effect of U.S. monetary policy on U.S. stock prices. To overcome this bias, we propose a new identification method based on the "Impossible Trinity" theory which argues that an economy with a fixed exchange rate and...

This study investigates the ability of market beta, book-to-market equity, leverage, and earnings-price ratio to explain the cross-sectional variation in expected returns in the stock market of Sri Lanka. The sample of the study consists of a total of 88 companies which are listed on the Colombo...

This paper studies the co-movement of global yield curve dynamics using a Bayesian hierarchical factor model augmented with macroeconomic fundamentals. Our data-driven approach is able to pin down the drivers of yield curve dynamics and produce plausible term premium estimates. We reveal the...

We examine the relation between the capacity for financing through rights and seasoned public offers of equity and subsequent stock returns in China. The results show that the capacity for rights and public offers is reliably negatively related with future returns for firms that met regulatory...

Closed-end funds have been a topic of lively debate for several decades. In this paper we focus on studies relating to liquidity, sentiment and segmentation and, in particular, on studies that investigate closed-end country funds. We extend the previous survey by Dimson & Minio-Kozerski (1999)...