On financial risk and the safe haven characteristics of Swiss franc exchange rates

Christian Grisse and Thomas Nitschka

Journal of Empirical Finance, 2015, vol. 32, issue C, 153-164

Abstract: We analyse bilateral Swiss franc exchange rate returns in an asset pricing framework to evaluate the Swiss franc's safe haven characteristics. A “safe haven” currency is a currency that offers hedging value against global risk, both on average and in particular in crisis episodes. To explore these issues we estimate the relationship between exchange rate returns and risk factors in augmented UIP regressions, using recently developed econometric methods to account for the possibility that the regression coefficients may be changing over time. Our results highlight that in response to increases in global risk the Swiss franc appreciates against typical carry trade investment currencies such as the Australian dollar, but depreciates against the US dollar, the Yen and the British pound. Thus, the Swiss franc exhibits safehaven characteristics against many, but not all other currencies. We find statistically significant time variation in the relationship between Swiss franc returns and risk factors, with this link becoming stronger in times of stress.

Keywords: Exchange rate; Risk factors; Safe haven; Swiss franc; Uncovered interest rate parity (search for similar items in EconPapers)
JEL-codes: F10 G15 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (73)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0927539815000249
Full text for ScienceDirect subscribers only

Related works:
Working Paper: On financial risk and the safe haven characteristics of Swiss franc exchange rates (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:32:y:2015:i:c:p:153-164

DOI: 10.1016/j.jempfin.2015.03.006

Access Statistics for this article

Journal of Empirical Finance is currently edited by R. T. Baillie, F. C. Palm, Th. J. Vermaelen and C. C. P. Wolff

More articles in Journal of Empirical Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().