Business Cycles and Currency Returns / Riccardo Colacito, Steven J. Riddiough, Lucio Sarno.

Format:

Book

Author/Creator:

Colacito, Riccardo.

Contributor:

National Bureau of Economic Research.

Riddiough, Steven J.

Sarno, Lucio.

Series:

Working Paper Series (National Bureau of Economic Research) no. w26299.

NBER working paper series no. w26299

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2019.

Summary:

We find a strong link between currency excess returns and the relative strength of the business cycle. Buying currencies of strong economies and selling currencies of weak economies generates high returns both in the cross section and time series of countries. These returns stem primarily from spot exchange rate predictability, are uncorrelated with common currency investment strategies, and cannot be understood using traditional currency risk factors in either unconditional or conditional asset pricing tests. We also show that a business cycle factor implied by our results is priced in a broad currency cross section.

Notes:

Print version record

September 2019.