IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v70y2024i9p5795-5815.html
   My bibliography  Save this article

Current Account Uncertainty and Currency Premia

Author

Listed:
  • Pasquale Della Corte

    (Department of Finance, Imperial College London, London SW7 2AZ, United Kingdom)

  • Aleksejs Krecetovs

    (Brevan Howard Centre, Imperial College London, London SW7 2AZ, United Kingdom)

Abstract

We empirically study the relationship between currency excess returns and current account uncertainty, measured as forecast dispersion. We find that investment currencies deliver low returns, whereas funding currencies offer a hedge when current account uncertainty is unexpectedly high. Moreover, an increase in current account uncertainty is associated with higher expected future excess returns on investment currencies. This mechanism is consistent with the recent advances in exchange rate theory based on capital flows in imperfect financial markets.

Suggested Citation

  • Pasquale Della Corte & Aleksejs Krecetovs, 2024. "Current Account Uncertainty and Currency Premia," Management Science, INFORMS, vol. 70(9), pages 5795-5815, September.
    • Handle: RePEc:inm:ormnsc:v:70:y:2024:i:9:p:5795-5815
    DOI: 10.1287/mnsc.2023.4949
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.2023.4949
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mnsc.2023.4949?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:70:y:2024:i:9:p:5795-5815. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.