Conditional risk premia in currency markets and other asset classes

• 成果类型: Article
• 署名作者: Lettau, Martin; Maggiori, Matteo; Weber, Michael
• 署名单位: University of California System; University of California Berkeley; National Bureau of Economic Research; Harvard University; University of Chicago
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2014.07.001
• 发表日期: 2014
• 页码: 197-225
• 关键词: Carry trade; Commodity basis; Downside risk; Equity cross section

摘要

The downside risk capital asset pricing model (DR-CAPM) can price the cross section of currency returns. The market-beta differential between high and low interest rate currencies is higher conditional on bad market returns, when the market price of risk is also high, than it is conditional on good market returns. Correctly accounting for this variation is crucial for the empirical performance of the model. The DR-CAPM can jointly rationalize the cross section of equity, equity index options, commodity, sovereign bond and currency returns, thus offering a unified risk view of these asset classes. In contrast, popular models that have been developed for a specific asset class fail to jointly price other asset classes. (C) 2014 Elsevier B.V. All rights reserved.