The paper studies the relation between the US-Dollar/Euro exchange rate and US and euro area interest rates during normal and crisis times. We describe each asset price within a multifactor model and identify the causal contemporaneous relations through heteroskedasticity. We find that US rates...

The common perception in the literature is that current dividend yields are uninformative about future dividends, but contain some information about future stock returns. In this paper, we show that this finding reverses when looking at a broad panel of countries outside the U.S.. In particular,...

We analyze and evaluate novel data on exchange rate expectations after the collapse of Lehman Brothers for more than 60 economies over different horizons. We find that monetary policy effects on expectations are time-varying and identify substantial international spillovers over the recent...

This study analyzes the dynamics between real e ective exchange rates and current account patterns from a novel perspective. We start by dissecting long-run and time-varying short-run dynamics between both variables. Following this, we extend our framework by including interest rates into our...

This paper considers how an investor in foreign exchange markets might exploit predictive information in macroeconomic fundamentals by allowing for switching between multivariate time series regression models. These models are chosen to reflect a wide array of established empirical and...

We introduce a novel currency risk measure based on American Depositary Receipts (ADRs). Using a multifactor pricing model, we exploit ADR investors’ exposure to potential devaluation losses to derive an indicator of currency risk. Using weekly data for a sample of 831 ADRs located in 23...

There is a general acceptance of the fact that a significant direct relationship between financial markets and macroeconomic variables exists, especially by considering the assertion that developed financial markets correspond to high GDP levels. This paper provides an investigation of the...

We isolate the direct bank-to-sovereign distress channel within the Eurozone's sovereignbank-loop by exploiting the global, non-Eurozone related variation in stock prices. We instrument banking sector stock returns in the Eurozone with exposure-weighted stock market returns from non-Eurozone...

This paper examines how high-frequency trading decisions of individual investors are influenced by past price changes. Specifically, we address the question as to whether decisions to open or close a position are different when investors already hold a position compared to when they don't. Based...