Global macro risks in currency excess returns

Kimberly Berg and Nelson Mark

Journal of Empirical Finance, 2018, vol. 45, issue C, 300-315

Abstract: We study the cross-sectional variation of carry-trade-generated currency excess returns in terms of their exposure to global macroeconomic fundamental risk. The risk factor is the cross-country high-minus-low conditional skewness of the unemployment rate gap. It gives a measure of global macroeconomic uncertainty and is robustly priced in currency excess returns. A widening of the high-minus-low skewness of the unemployment rate gap signifies increasing divergence, disparity, and inequality of economic performance across countries.

Keywords: Currency excess returns; Beta-risk; Carry trade; Global macro risk; Uncertainty (search for similar items in EconPapers)
JEL-codes: F3 F4 G1 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (23)

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Related works:
Working Paper: Global Macro Risks in Currency Excess Returns (2017)
Working Paper: Global Macro Risks in Currency Excess Returns (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:45:y:2018:i:c:p:300-315

DOI: 10.1016/j.jempfin.2017.11.011

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