Currency risk premia in global stock markets
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Author
Contributions
- Merritt, Matthew D. - Contributor
- International Monetary Fund. Western Hemisphere Dept. - Contributor
Publication
2006 - International Monetary Fund, Western Hemisphere Dept., Washington, D.C., District of Columbia
Language
English
Word Count
6,250 words, Guess
Page Count
25 pages
Identifiers
- Better World Books9781451864540
- Better World Books9781451991161
- Better World Books9781452746104
- Open LibraryOL21611014M
Classifications
- LCCHD61
Description
Large fundamental imbalances persist in the global economy, with potential exchange rate implications. This paper assesses whether exchange rate risk is priced across G-7 stock markets. Given the multitude of hedging instruments available, theory suggests that stock market investors should not be compensated for currency risk. However, data covering 33 industry portfolios across seven major stock markets suggest that not only is exchange rate risk priced in many markets, but that it is time-varying and sensitive to currency-specific shocks. With stock market investors typically exhibiting "home bias," this suggests that investors are using equity asset proxies to hedge the exchange rate risks to consumption.
Subjects
Series Statement
- IMF working paper -- WP/06/194
Links
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