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Measures of global uncertainty and carry-trade excess returns

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  • Berg, Kimberly A.
  • Mark, Nelson C.

Abstract

Asset market participants generally do not like uncertainty. In studying the cross-section of carry-trade-generated currency excess returns and their exposure to macroeconomic uncertainty, we find it also to be true for those participating in this market. A global, news-based measure of macroeconomic uncertainty is negatively and robustly priced into these excess returns, which is consistent with the existence of a global uncertainty factor.

Suggested Citation

  • Berg, Kimberly A. & Mark, Nelson C., 2018. "Measures of global uncertainty and carry-trade excess returns," Journal of International Money and Finance, Elsevier, vol. 88(C), pages 212-227.
    • Handle: RePEc:eee:jimfin:v:88:y:2018:i:c:p:212-227
    DOI: 10.1016/j.jimonfin.2017.07.010
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    More about this item

    Keywords

    Currency excess returns; Global uncertainty; Beta-risk; Carry trade;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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