This paper explores whether foreign exchange volatility is a priced factor in the US stock market. Our investigation is motivated by a number of empirical as well as theoretical considerations. Empirically, Menkhoff et al. (2012) find that foreign exchange volatility is a pervasive factor across...

The present paper explores the cross-sectional pricing power of foreign exchange volatility in the US stock market by decomposing it into short- and long-run components. Our approach is motivated by Bartov et al. (1996). Empirically, we find supporting evidence that the long-run component of...