Economic, Financial, and Fundamental Global Risk In and Out of the EMU

Wayne Ferson () and Campbell Harvey ()

No 6967, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We explore the different factors that drive expected returns in world markets. Our research offers two innovations. First, the introduction of the Euro currency unit greatly reduces the complexity of including foreign exchange risk in asset pricing models. We use a synthetic Euro excess return along with a Yen excess return to assess country equity sensitivities to currency risk factors. Second, when combining the currency factors with a group of economic factors, we measure the incremental information in the factor proposed in Fama and French (1998). We find that a global price-to-book factor offers little additional explanatory power over and above a model that includes economic risk factors.

JEL-codes: G12 G15 (search for similar items in EconPapers)
Date: 1999-02
New Economics Papers: this item is included in nep-cfn, nep-eec, nep-fmk and nep-ifn
Note: AP
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Published as Swedish Economic Policy Review, Vol. 6 (1999): 123-184.

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Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:6967

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