Differences in beliefs and currency risk premiums

• 成果类型: Article
• 署名作者: Beber, Alessandro; Breedon, Francis; Buraschi, Andrea
• 署名单位: Imperial College London; University of Amsterdam
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2010.07.001
• 发表日期: 2010
• 页码: 415-438
• 关键词: Option pricing; Difference in beliefs; incomplete markets; Foreign exchange

摘要

This paper studies the importance of heterogeneous beliefs for the dynamics of asset prices. We focus on currency markets, where the absence of short-selling constraints allows us to perform sharper tests of theoretical predictions. Using a unique data set with detailed information on foreign-exchange forecasts, we construct an empirical proxy for differences in beliefs. We show that this proxy has a strong effect on the implied volatility of currency options beyond the volatility of macroeconomic fundamentals. We document that differences in beliefs impact also on the shape of the implied volatility smile, on the volatility risk-premiums, and on future currency returns. (C) 2010 Elsevier B.V. All rights reserved.