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We describe a novel currency investment strategy, the `dollar carry trade,' which delivers large excess returns, uncorrelated with the returns on well-known carry trade strategies. Using a no-arbitrage model of exchange rates we show that these excess returns compensate U.S. investors for taking...
Persistent link: https://www.econbiz.de/10012857596
-year horizon. The estimated model implies that the variation in the exposure of U.S. investors to world-wide risk is the key driver …
Persistent link: https://www.econbiz.de/10013008793
-year horizon. The estimated model implies that the variation in the exposure of U.S. investors to world-wide risk is the key driver …
Persistent link: https://www.econbiz.de/10012462229
We construct risk-neutral return probability distributions from S&P 500 options data over the decade 2003 to 2013, separable into pre-crisis, crisis and post-crisis regimes. The pre-crisis period is characterized by increasing realized and, especially, option-implied returns. This translates...
Persistent link: https://www.econbiz.de/10010443041
We extract expectations about future economic growth from firms' cross-border merger and acquisition (M&A) announcements, and show they predict changes in economic growth rates and foreign exchange rate returns. The predictability is driven by the cross-border M&A announcements of cyclical...
Persistent link: https://www.econbiz.de/10013300616
Global economic growth at the end of the year strongly predicts returns from a wide spectrum of international assets, such as global, regional, and individual-country stocks, FX, and commodities. Global economic growth at other times of the year does not predict international returns. Low growth...
Persistent link: https://www.econbiz.de/10013027578
"The average forward discount of the dollar against developed market currencies is the best predictor of average foreign currency excess returns earned by U.S. investors on a long position in a large basket of foreign currencies and a short position in the dollar. The predicted excess returns...
Persistent link: https://www.econbiz.de/10008695784
Persistent link: https://www.econbiz.de/10010375937
Because of the uncertainty about how to model the growth process of our economy, there is still much confusion about which discount rates should be used to evaluate actions having long-lasting impacts, as in the contexts of climate change, social security reforms or large public infrastructures...
Persistent link: https://www.econbiz.de/10009689360
The recent macro-finance yield curve literature does not agree neither about term premia empirical properties nor about the importance or even the direction of its relationship with future economic activity. This paper proposes a two-step approach to handle both problems. First, in a VAR...
Persistent link: https://www.econbiz.de/10013132933