The U.S. Dollar and Variance Risk Premia Imbalances
Anders Posselt  1@  , Mads Kjær  1@  
1 : Aarhus University, CREATES

This paper provides empirical evidence for the difference in variance risk premium in the U.S. against other economies (VPI) having significant predictive power on monthly U.S. Dollar movements. The predictive power of VPI is rationalized by the variance risk premium's economic interpretation and the asset market view of exchange rates. We show that VPI is nonredudant relative to traditional predictors and the predictive evidence has significant economic value for investors.


Online user: 3 Privacy
Loading...