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Foreign Exchange Volatility Is Priced in Equities

Hui Guo (), Christopher Neely () and Jason Higbee

Financial Management, 2008, vol. 37, issue 4, 769-790

Abstract: This paper finds that standard asset pricing models fail to explain the significantly negative delta hedging errors that occur as a result of the purchase of options on foreign exchange futures. Foreign exchange volatility does influence stock returns, however. The volatility of the JPY/USD exchange rate predicts the time series of stock returns and is priced in the cross‐section of stock returns.

Date: 2008
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https://doi.org/10.1111/j.1755-053X.2008.00034.x

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Working Paper: Foreign exchange volatility is priced in equities (2006) Downloads
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