The global factor structure of exchange rates

• 成果类型: Article
• 署名作者: Korsaye, Sofonias Alemu; Trojani, Fabio; Vedolin, Andrea
• 署名单位: University of Geneva; University of Geneva; Boston University; National Bureau of Economic Research; Center for Economic & Policy Research (CEPR); Boston University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2023.01.005
• 发表日期: 2023
• 页码: 21-46
• 关键词: Stochastic discount factor; factor models; financial frictions; market segmentation

摘要

We propose a model-free methodology to estimate international stochastic discount fac-tors (SDFs) that jointly price cross-sections of international stocks, bonds, and currencies in markets with frictions. We theoretically establish a SDF decomposition into one global factor and a currency basket. We show that our global factor prices a large cross-section of international asset returns, not just in-but also out-of-sample, across different currency denominations. Moreover, the pricing ability of the global factor is largely independent of the market structure or the size and type of market friction.(c) 2023 Elsevier B.V. All rights reserved.