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Global Macro Risks in Currency Excess Returns

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  • Kimberly A. Berg
  • Nelson Mark

Abstract

We study the cross-sectional variation of carry-trade-generated currency excess returns in terms of their exposure to global macroeconomic fundamental risk. The risk factor is the cross-country high-minus-low conditional skewness of the unemployment rate gap. It gives a measure of global macroeconomic uncertainty and is robustly priced in currency excess returns. A widening of the high-minus-low skewness of the unemployment rate gap signifies increasing divergence, disparity, and inequality of economic performance across countries.

Suggested Citation

  • Kimberly A. Berg & Nelson Mark, 2017. "Global Macro Risks in Currency Excess Returns," NBER Working Papers 23764, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:23764
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    References listed on IDEAS

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    Cited by:

    1. Ferrara, L. & Istrefi, K., 2016. "Impact des chocs d’incertitude sur l’économie mondiale – Synthèse de conférence," Bulletin de la Banque de France, Banque de France, issue 206, pages 61-68.
    2. repec:eee:jbfina:v:84:y:2017:i:c:p:88-106 is not listed on IDEAS
    3. Poulsen, Thomas & Lema, Rasmus, 2017. "Is the supply chain ready for the green transformation? The case of offshore wind logistics," Renewable and Sustainable Energy Reviews, Elsevier, vol. 73(C), pages 758-771.

    More about this item

    JEL classification:

    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • G1 - Financial Economics - - General Financial Markets

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