cross-section of foreign currency risk premia and consumption growth risk
Subtitle: a comment
By: Craig Burnside.
Contributors: National Bureau of Economic Research.
Series: NBER working paper series -- no. 13129.; Working paper series (National Bureau of Economic Research) -- working paper no. 13129.
Publisher: National Bureau of Economic Research
Published: 2007
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 38
Subjects: Consumption (Economics) -- Mathematical models -- United States; Risk -- Mathematical models; Investments, Foreign -- United States
Description: "Lustig and Verdelhan (2007) argue that the excess returns to borrowing US dollars and lending in foreign currency "compensate US investors for taking on more US consumption growth risk," yet these excess returns are all approximately uncorrelated with the consumption risk factors they study. Hence, their model cannot explain the cross-sectional variation of the returns. Their positive assessment results from allowing for a large constant in the model, and from ignoring sampling uncertainty in estimated betas used as explanatory variables in cross-sectional regressions that determine estimated consumption risk premia."--abstract.
Notes: "May 2007"

Includes bibliographical references (p. 16).

Also available in PDF from the NBER world wide web site (www.nber.org).