Business Cycles and the Cross-Section of Currency Returns

Since Saunders (1993), there has been ongoing research on whether the weather can affect asset prices. Our study of the impact of weather on stock and foreign exchange (henceforth FX) markets shows that the weather has no effect during 2002-2018, suggesting that any effect may have dissipated after discovery as practitioners have tried to use investment vehicles to exploit it. The results indicate that mood changes caused by the weather do not significantly affect FX and stock returns.

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Is there still a weather anomaly? An investigation of stock and foreign exchange markets

Andrikopoulos

Wang

Zheng

2019

Finance Research Letters

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The Term Structures of Coentropy in International Financial Markets

Chabi-Yo

Colacito

2019

Management Science

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We propose a new entropy-based correlation measure (coentropy) to evaluate the performance of international asset pricing models. Coentropy captures the codependence of two random variables beyond normality. We document that the coentropy of international stochastic discount factors (SDFs) can be decomposed into a series of entropy-based correlations of permanent and transitory components of the SDFs. We employ the cross section of G-10 countries to obtain model-free estimates of all the components of coentropy at various horizons and we show that the generalization of the long-run risk model featuring two predictable components of consumption growth rates, global disasters, and recursive preferences can account for the composition of codependence at all horizons. This paper was accepted by Tomasz Piskorski, finance.

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The Term Structures of Co-Entropy in International Financial Markets

Chabi-Yo

Colacito

2013

SSRN Journal

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Business Cycles and the Cross-Section of Currency Returns

Cited by 7 publications

References 43 publications

Is there still a weather anomaly? An investigation of stock and foreign exchange markets

Is there still a weather anomaly? An investigation of stock and foreign exchange markets

The Term Structures of Coentropy in International Financial Markets

The Term Structures of Co-Entropy in International Financial Markets

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