This setting lets you change the way you view articles. You can choose to have articles open in a dialog window, a new tab, or directly in the same window.
Open in Dialog
Open in New Tab
Open in same window

American Economic Review: Vol. 97 No. 1 (March 2007)

AER Volume. 97, Issue 1 | leftPrevious ArticleNext Articleright

Expand

Quick Tools:

Print Article Summary Email Link to this Article Export Citation
Sign up for Email Alerts Follow us on Twitter

Explore:

AER - All Issues

AER Forthcoming Articles

The Cross Section of Foreign Currency Risk Premia and Consumption Growth Risk

Article Citation

Lustig, Hanno, and Adrien Verdelhan. 2007. "The Cross Section of Foreign Currency Risk Premia and Consumption Growth Risk." American Economic Review, 97(1): 89-117.

DOI: 10.1257/aer.97.1.89

Abstract

Aggregate consumption growth risk explains why low interest rate currencies do not appreciate as much as the interest rate differential and why high interest rate currencies do not depreciate as much as the interest rate differential. Domestic investors earn negative excess returns on low interest rate currency portfolios and positive excess returns on high interest rate currency portfolios. Because high interest rate currencies depreciate on average when domestic consumption growth is low and low interest rate currencies appreciate under the same conditions, low interest rate currencies provide domestic investors with a hedge against domestic aggregate consumption growth risk. (JEL E21, E43, F31, G11)

Article Full-Text Access

Full-text Article

Additional Materials

Download Data Set (22.60 KB)

Authors

Lustig, Hanno
Verdelhan, Adrien


American Economic Review



AEA Member Login:


Quick Tools:

Email Link to this Issue

Sign up for Email Alerts

Follow us on Twitter

Subscription Information
(Institutional Administrator Access)

Explore:

AER - All Issues

AER - Forthcoming Articles

AEA Journals

Virtual Field Journals

AEAweb | AEA Journals | Contact Us