The long-run component of foreign exchange volatility and stock returns

Ding Du, Ou Hu

Research output: Contribution to journalArticle

1 Scopus citations

Abstract

The present paper explores the cross-sectional pricing power of foreign exchange volatility in the US stock market by decomposing it into short- and long-run components. Our approach is motivated by Bartov et al. (1996). Empirically, we find supporting evidence that the long-run component of foreign exchange volatility is priced in the US stock market. Our findings have important implications for international finance and empirical asset pricing.

Original languageEnglish (US)
Pages (from-to)268-284
Number of pages17
JournalJournal of International Financial Markets, Institutions and Money
Volume31
Issue number1
DOIs
StatePublished - Jul 2014

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Keywords

  • F31
  • Foreign exchange volatility
  • G15
  • Long-run component of foreign exchange volatility
  • Mimicking-factor portfolios
  • Short-run component of foreign exchange volatility

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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