How to order
IMF Publications

Working Papers in full text
2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 All


Other research-related activities and publications of the IMF can be found at IMF Research

Free Email Notification

Receive emails when we post new items of interest to you.

Subscribe or Modify your profile



Currency Risk Premia in Global Stock Markets

Author/Editor: Roache, Shaun K. | Merritt, Matthew D.
Authorized for Distribution: August 1, 2006
Electronic Access: Free Full Text (PDF file size is 504KB)
Use the free Adobe Acrobat Reader to view this PDF file.
 
Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: Large fundamental imbalances persist in the global economy, with potential exchange rate implications. This paper assesses whether exchange rate risk is priced across G-7 stock markets. Given the multitude of hedging instruments available, theory suggests that stock market investors should not be compensated for currency risk. However, data covering 33 industry portfolios across seven major stock markets suggest that not only is exchange rate risk priced in many markets, but that it is time-varying and sensitive to currency-specific shocks. With stock market investors typically exhibiting "home bias," this suggests that investors are using equity asset proxies to hedge the exchange rate risks to consumption.
 
Order a print copy
Series: Working Paper No. 06/194
Subject(s): Stock markets | Arbitrage | Asset prices
Author's keyword(s): arbitrage pricing theory | risk prices | asset pricing
 
English  
    Published:   August 1, 2006        
    ISBN/ISSN:   0 / 1934-7073   Format:   Paper
    Stock No:   WPIEA2006194   Pages:   27
    Price:   US$15.00 (Academic Rate: US$15.00 )
       
     
Please address any questions about this title to publications@imf.org.