Currency Premia and Global Imbalances

• 成果类型: Article
• 署名作者: Della Corte, Pasquale; Riddiough, Steven J.; Sarno, Lucio
• 署名单位: Imperial College London; Center for Economic & Policy Research (CEPR); University of Melbourne; City St Georges, University of London
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhw038
• 发表日期: 2016
• 页码: 2161
• 关键词: exchange-rates; cross-section; Carry trade; risk premia; SHORT RUN; heteroskedasticity; momentum; returns

摘要

We show that a global imbalance risk factor that captures the spread in countries' external imbalances and their propensity to issue external liabilities in foreign currency explains the cross-sectional variation in currency excess returns. The economic intuition is simple: net debtor countries offer a currency risk premium to compensate investors willing to finance negative external imbalances because their currencies depreciate in bad times. This mechanism is consistent with exchange rate theory based on capital flows in imperfect financial markets. We also find that the global imbalance factor is priced in cross-sections of other major asset markets.