We explore the interaction between exchange rates, institutional investor currency flows and exchange-rate fundamentals. We find that these flows are highly correlated with contemporaneous and lagged exchange rate changes, and that they carry information for future excess currency returns. This...

We explore the interaction between exchange rates, institutional investor currency flows and exchange-rate fundamentals. We find that these flows are highly correlated with contemporaneous and lagged exchange rate changes, and that they carry information for future excess currency returns. This...

Simple regression tests that have power against the alternatives that. asset prices and expected future asset returns are excessively volatile are developed and performed for the foreign exchange and stock markets. These tests have a number of advantages over alternative, variance hounds...