The theoretical nature of risk premiums in foreign currency futures markets is derived and studied empirically. Estimation problems encountered in using futures data are discussed. Since forward rates and futures prices are demonstrated to be approximately equal, and because risk premiums in...

Typical evaluations of the choice of exchange rate regime employ a criterion function that depends on the real performance of the economy, and they focus on regimes that are expected to last indefinitely. This latter feature is strongly contradicted by the transitory nature of actual...

This paper examines the determination of risk premiums in foreign exchange markets. The statistical model is based on a theoretical model of asset pricing, which leads to severe cross-equation constraints. Statistical tests lead to a rejection of these constraints. We examine the robustness of...

This paper develops an open-economy macroeconomic model which can be used to interpret the observed fluctuations in output, inventories,prices,and exchange rates in the medium-sized economies of the world. The model is consistent with the major empirical regularities that have been discovered in...

We examine the Cochrane and Piazzesi (2005, 2008) model in several out-of-sample analyzes. The model's one-factor forecasting structure characterizes the term structures of additional currencies in samples ending in 2003. In post-2003 data one-factor structures again characterize each currency's...

We examine aggregate idiosyncratic volatility in 23 developed equity markets, measured using various methodologies, and we find no evidence of upward trends when we extend the sample until 2008. Instead, idiosyncratic volatility appears to be well described by a stationary autoregressive process...

Stocks with recent past high idiosyncratic volatility have low future average returns around the world. Across 23 developed markets, the difference in average returns between the extreme quintile portfolios sorted on idiosyncratic volatility is -1.31% per month, after controlling for world...

We examine international stock return comovements using country-industry and country-style portfolios. We first establish that parsimonious risk-based factor models capture the covariance structure of the data better than the popular Heston-Rouwenhorst (1994) model. We then establish the...

We examine the pricing of aggregate volatility risk in the cross-section of stock returns. Consistent with theory, we find that stocks with high sensitivities to innovations in aggregate volatility have low average returns. In addition, we find that stocks with high idiosyncratic volatility...

We investigate the ability of several international asset pricing models to price the returns on 36 FTSE global industry portfolios. The models are the international capital asset pricing model (ICAPM) the ICAPM with exchange risks, and global two-factor and three-factor Fama-French (1996, 1998)...