Momentum in stock market returns: implications for risk premia on foreign currencies
AbstractMomentum in foreign stock market returns signals currency excess returns. Portfolios of currencies from past stock market winner countries offer higher risk premia than past stock market loser currency portfolios. This pattern is unrelated to the currencies’ forward discounts. While recently proposed asset-pricing models for currency returns work reasonably well in explaining the time variation in the stock market momentum-sorted currency portfolio returns, rationalizing the average excess returns on these portfolios remains a challenge. Only the introduction of an ad-hoc motivated factor, extracted from the stock market momentum-sorted currency portfolio returns, helps in this respect.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Financial Economics.
Volume (Year): 23 (2013)
Issue (Month): 7 (April)
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Other versions of this item:
- Thomas Nitschka, 2010. "Momentum in stock market returns: Implications for risk premia on foreign currencies," Working Papers 2010-11, Swiss National Bank.
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Q. Farooq Akram, & Dagfinn Rime & Lucio Sarno, 2005.
"Arbitrage in the foreign exchange market: Turning on the microscope,"
2005/12, Norges Bank.
- Akram, Q. Farooq & Rime, Dagfinn & Sarno, Lucio, 2008. "Arbitrage in the foreign exchange market: Turning on the microscope," Journal of International Economics, Elsevier, vol. 76(2), pages 237-253, December.
- Akram, Q. Farooq & Rime, Dagfinn & Sarno, Lucio, 2006. "Arbitrage in the Foreign Exchange Market: Turning on the Microscope," SIFR Research Report Series 42, Institute for Financial Research.
- Akram, Qaisar Farooq & Rime, Dagfinn & Sarno, Lucio, 2008. "Arbitrage in the Foreign Exchange Market: Turning on the Microscope," CEPR Discussion Papers 6878, C.E.P.R. Discussion Papers.
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