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Location, location, location: currency effects and return predictability?

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  • Steven J. Jordan
  • Andrew Vivian
  • Mark E. Wohar

Abstract

Most international financial market studies that compare across countries utilize the US dollar as the common numeraire. We explore the little studied question of the appropriate choice for the base currency and ask if currency choice can affect the final conclusion of whether predictability exists. We provide empirical results for stock return predictability that demonstrate the importance of the numeraire. For example, the existence (absence) of predictability for a US investor does not necessarily imply the existence (absence) of predictability for other foreign investors.

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  • Steven J. Jordan & Andrew Vivian & Mark E. Wohar, 2015. "Location, location, location: currency effects and return predictability?," Applied Economics, Taylor & Francis Journals, vol. 47(18), pages 1883-1898, April.
    • Handle: RePEc:taf:applec:v:47:y:2015:i:18:p:1883-1898
    DOI: 10.1080/00036846.2014.1000537
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    5. Lawrenz, Jochen & Zorn, Josef, 2017. "Predicting international stock returns with conditional price-to-fundamental ratios," Journal of Empirical Finance, Elsevier, vol. 43(C), pages 159-184.

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