The long-run component of foreign exchange volatility and stock returns

Ding Du and Ou Hu

Journal of International Financial Markets, Institutions and Money, 2014, vol. 31, issue C, 268-284

Abstract: 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 foreign exchange volatility is priced in the US stock market. Our findings have important implications for international finance and empirical asset pricing.

Keywords: Foreign exchange volatility; Long-run component of foreign exchange volatility; Short-run component of foreign exchange volatility; Mimicking-factor portfolios (search for similar items in EconPapers)
JEL-codes: F31 G15 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:31:y:2014:i:c:p:268-284

DOI: 10.1016/j.intfin.2014.04.005

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