Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments June 10, 2016 erstellt
Beschreibung:
This paper addresses the predictive ability of currency volatility risk premium - the difference between an implied and a realized volatility - over US dollar exchange rates using a time series perspective. The intuition is that, when risk aversion sentiment increases, the market quickly discounts the currency, and latter this discount is accrued, leading to a future currency appreciation. Based on two different samples with a diversified set of 32 currencies, I document a positive relationship between currency volatility risk premium and future currency returns. Results remain robust even after controlling for traditional fundamental predictors like Purchase Power Parity and interest rate differential