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The World Price of Foreign Exchange Risk
Abstract
Departures from purchasing power parity imply that different countries have different prices for goods when a common numeraire is used. Stochastic changes in exchange rates are associated with changes in these prices and constitute additional sources of risk in asset pricing models. This article investigates whether exchange rate risks are priced in international asset markets using a conditional approach that allows for time variation in the rewards for exchange rate risk. The results for equities and currencies of the world's four largest equity markets support the existence of foreign exchange risk premia.
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Citations
Cited by
Size, value, and momentum in international stock returns
Fama, E. F., & French, K. R. (2012) · Journal of Financial Economics · doi:10.1016/j.jfineco.2012.05.011 · Cited by 1,767
Foerster, S. R., & Karolyi, G. A. (1999) · The Journal of Finance · doi:10.1111/0022-1082.00134 · Cited by 1,050
Predictable Risk and Returns in Emerging Markets
Harvey, C. R. (1995) · Review of Financial Studies · doi:10.1093/rfs/8.3.773 · Cited by 982
Dynamic stock market integration driven by the European Monetary Union: An empirical analysis
Kim, S. J., Moshirian, F., & Wu, E. (2005) · Journal of Banking & Finance · doi:10.1016/j.jbankfin.2004.09.002 · Cited by 346
Size, value, and momentum in emerging market stock returns
Cakici, N., Fabozzi, F. J., & Tan, S. (2013) · Emerging Markets Review · doi:10.1016/j.ememar.2013.03.001 · Cited by 298
Metadata
- Authors
- DUMAS, B., & SOLNIK, B.
- Venue
- The Journal of Finance
- Publisher
- Wiley
- Published
- 1995-06
- Volume
- 50
- Issue
- 2
- Pages
- 445-479
- ISSN
- 0022-1082 (ISSN-L)
- 1540-6261
- OpenAlex
- W3021353747
- Cited by
- 765
- References
- 0
- FWCI
- 26.84
- Type
- journal article
- Language
- en
- Open access
- closed
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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
