Referierte Aufsätze Web of Science
Lukas Menkhoff, Lucio Sarno, Maik Schmeling, Andreas Schrimpf
In: The Review of Financial Studies 30 (2017), 2, S. 416-441
We assess the properties of currency value strategies based on real exchange rates. We find that real exchange rates have predictive power for the cross-section of currency excess returns. However, adjusting real exchange rates for key country-specific fundamentals (productivity, the quality of export goods, net foreign assets, and output gaps) better isolates information related to the currency risk premium. In turn, the resultant measure of currency value displays considerably stronger predictive power for currency excess returns. Finally, the predictive information content in our currency value measure is distinct from that embedded in popular currency strategies, such as carry and momentum.
Topics: Financial markets
JEL-Classification: F31;G12;G15
DOI:
https://doi.org/10.1093/rfs/hhw067