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Measures of Global Uncertainty and Carry-Trade Excess Returns

Author

Listed:
  • Kimberly A. Berg

    (Miami University)

  • Nelson Mark

    (University of Notre Dame and NBER)

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

  • Kimberly A. Berg & Nelson Mark, 2017. "Measures of Global Uncertainty and Carry-Trade Excess Returns," GRU Working Paper Series GRU_2017_002, City University of Hong Kong, Department of Economics and Finance, Global Research Unit.
    • Handle: RePEc:cth:wpaper:gru_2017_002
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    File URL: https://www.cb.cityu.edu.hk/ef/doc/GRU/WPS/GRU%232017-002%20Kimberly%20Berg%20%26%20Nelson%20Mark.pdf
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    References listed on IDEAS

    as
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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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