Foreign Currency Returns and Systematic Risks

Atanasov, Victoria; Nitschka, Thomas

doi:10.1017/s002210901400043x

Cited by 17 publications

(6 citation statements)

References 57 publications

(130 reference statements)

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“…In many asset pricing models where investor has either CRRA or the Epstein-Zin preference, the log SDF is connected to the consumption growth, whose variation is clearly linked to that of future cash flows of contingent claims. In addition, the predictability of cash flow news is in line with the findings documented by Atanasov and Nitschka (2015). In an ICAPM framework, they show that a common source of systematic risk in stock and currency returns is reflected in the market return's cash-flow news.…”

Section: Return Decompositionsupporting

confidence: 78%

“…There are three main contributions in this paper. First and foremost, our work is similar to Atanasov and Nitschka (2015) in the sense that we both study the common source of systematic risk between those two markets. While they uncover the integration by exploring the effect of discount rate and cash-flow news of stock return on the carry trade portfolios, we use data of exchange rate to estimate the pricing kernels within a no-arbitrage affine model and investigate the implications of a key factor (Forex factor ) in the estimated pricing kernel on the stock market.…”

Section: Introductionmentioning

confidence: 93%

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The Share of Systematic Risk in Foreign Exchange and Stock Markets

Zeng

2016

SSRN Journal

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Section: Return Decompositionsupporting

confidence: 78%

Section: Introductionmentioning

confidence: 93%

The Share of Systematic Risk in Foreign Exchange and Stock Markets

Zeng

2016

SSRN Journal

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“…Beyond that risk-free rate, for each dollar of standard deviation in philanthropic giving that the institution accepts, they can expect an average additional return of $0.16 (or 0.2%). In sum, the curve is comparable to risk-return tradeoffs in other financial assets: Mensah (2015) calculated 0.02 to 0.12% for 19th century stock markets, French (2015) calculated 0.1 to 0.3% for contemporary U.S. and ASEAN stock markets, Atanasov and Nitschka (2015) calculated a range of 0.01 to 0.38% for most major world currencies.…”

Section: Regression Line and Asset Classesmentioning

confidence: 78%

Don’t Put All of Your Alums in One Basket: College Admissions Decisions as a Portfolio Choice Problem

Dahl¹,

Johnson²

2016

International Journal of Financial Research

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We consider philanthropy by college alums from an innovative and provocative perspective: what if prospective college students were considered members of asset classes with different risk-return combinations? Using forty years of merged admissions-philanthropy records on students at a highly selective liberal arts college, we estimate the simple financial model that this allegory implies. We find benefits to diversification, identify the slope of the market risk-return line, and point out the most (and least) attractive potential students in terms of their projected future donations.Keywords: admissions, alum, portfolio, CAPM IntroductionAlumni giving has become increasingly important for institutions of higher education, accounting for roughly fifteen percent of all private funding for higher education, or roughly $4 billion (Council for Aid to Education, 2012). Even as alumni giving has been rising (Kaplan, 2007), the participation rate of alumni giving back to their alma mater has been falling, while those who donate choose to contribute larger amounts (Engagement Strategies Group, 2010). Given this dynamic, there is enormous value in finding the right potential donors; it is unsurprising that academic models and consulting companies have tackled the question with fervor. This paper models alumni giving from a unique perspective, treating college admissions decisions as a portfolio choice problem, where prospective students are members of asset classes with rates of risk and return measured a priori by the propensity of each asset class to subsequently donate to their institution. While we do not suggest that admissions decisions are (or should be) made in this manner, we reflect on the implications of a simple Capital Asset Pricing Model (CAPM) framework using data provided by a selective liberal arts college.Academic research clearly describes patterns in alumni giving (e.g. Bruggink and Siddiqui,1995;Okunade et al., 1994;Wunnava and Lauze, 2001), identifying descriptive variables that predict philanthropy (Lara and Johnson, 2014;Meer, 2011;Meer and Rosen, 2007; Clotfelter, 2003; Monks, 2003;Cunningham and Cochi-Ficano, 2002; Forbes and Zampelli, 1997;Lindahl and Winship, 1992). Obvious demographic variables such as age, gender, ethnicity, and marital status have been shown to have predictive power, as have activities while in school (major, involvement in college sports, GPA, affiliation with a fraternity or sorority, certain kinds of financial aid) and post-graduation factors (time since graduation, number of relatives at one's alma mater, reunion years, willingness to share contact information with the college, response to college surveys, highest degree attained, participation in student government, induction into honorary societies, participation in alumni activities).In contrast, no study has proposed a predictive model based purely on factors known before the student enters higher education. Unlike the literature, our intention is not to explain or predict alumni giving, but to create asset ...

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“…1313Academic research connecting the FX and the stock markets is scarce. Early contributions include Dumas and Solnik (1995), Jorion (1991), and one recent paper by Atanasov and Nitschka (2015). However, most of these papers focus on the cross‐sectional predictability, whereas our analysis provides the time‐series evidence.…”

mentioning

confidence: 99%

The term structure of sovereign credit default swap and the cross‐section of exchange rate predictability

Calice

Zeng

2019

Int. J Fin Econ

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We provide novel evidence on exchange rate predictability by using the term premia of the sovereign credit default swap (CDS). Using a sample of 29 countries, we find that the sovereign CDS term premia significantly predict the exchange rates out‐of‐sample. On average, a steeper CDS spread curve for a country predicts its currency appreciation against the U.S. dollar (USD). Empirically, although the sovereign CDS level mainly reflects global risk, the information in the term premia of the sovereign CDS spreads reveals country‐specific risk. Notably, the predictive power of the term premia is robust after controlling for the sovereign CDS level and other conventional global macroeconomic and financial factors. Further analysis shows that the information in the sovereign CDS term premia is also helpful for forecasting international stock market returns.

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Foreign Currency Returns and Systematic Risks

Cited by 17 publications

References 57 publications

The Share of Systematic Risk in Foreign Exchange and Stock Markets

The Share of Systematic Risk in Foreign Exchange and Stock Markets

Don’t Put All of Your Alums in One Basket: College Admissions Decisions as a Portfolio Choice Problem

The term structure of sovereign credit default swap and the cross‐section of exchange rate predictability

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