Market news co-moments and currency returns

Mohammadreza Tavakoli Baghdadabad; Girijasankar Mallik

doi:10.1007/s00181-020-01951-y

Market news co-moments and currency returns

Mohammadreza Tavakoli Baghdadabad, Girijasankar Mallik

Western Sydney University

Research output: Contribution to journal › Article › peer-review

1 Citation (Scopus)

Abstract

We propose three co-moments of the market returns' cash-flow, and discount-rate shocks and examine empirically an intertemporal capital asset pricing model using the co-moments on currency returns as well as stock returns during Dec. 1983 to Dec. 2017. We find that our proposed model has explanatory power for both currency and stock portfolios. We find several common sources of market risk in currency and stock returns that are reflected in market news. Our findings show that the co-moments are related to currency risk premiums and outperform the well-known liquidity, dollar and HML risk factors.

Original language	English
Pages (from-to)	1819-1863
Number of pages	45
Journal	Empirical Economics
Volume	61
Issue number	4
DOIs	https://doi.org/10.1007/s00181-020-01951-y
Publication status	Published - Oct 2021

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© 2020, Springer-Verlag GmbH Germany, part of Springer Nature.

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title = "Market news co-moments and currency returns",

abstract = "We propose three co-moments of the market returns' cash-flow, and discount-rate shocks and examine empirically an intertemporal capital asset pricing model using the co-moments on currency returns as well as stock returns during Dec. 1983 to Dec. 2017. We find that our proposed model has explanatory power for both currency and stock portfolios. We find several common sources of market risk in currency and stock returns that are reflected in market news. Our findings show that the co-moments are related to currency risk premiums and outperform the well-known liquidity, dollar and HML risk factors.",

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AB - We propose three co-moments of the market returns' cash-flow, and discount-rate shocks and examine empirically an intertemporal capital asset pricing model using the co-moments on currency returns as well as stock returns during Dec. 1983 to Dec. 2017. We find that our proposed model has explanatory power for both currency and stock portfolios. We find several common sources of market risk in currency and stock returns that are reflected in market news. Our findings show that the co-moments are related to currency risk premiums and outperform the well-known liquidity, dollar and HML risk factors.

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Market news co-moments and currency returns

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