Exchange rate return predictability in times of geopolitical risk
International Review of Financial Analysis(2022)
摘要
We develop the hypothesis that geopolitical risk predicts exchange rate returns. Using data on 17 countries, we demonstrate that the information content embedded in geopolitical risk is economically useful and can improve the forecast accuracy of exchange rate returns. We show that geopolitical risk predicts 10 out of 17 (59%) exchange rate returns in in-sample tests while in out-of-sample tests predictability is found for 88% of currencies. Buy and sell signals generated from our model lead to higher returns compared to the historical average model. Our model delivers excess profits relative to the benchmark model in 11 out of 17 (65%) currencies.
更多查看译文
关键词
Exchange rate returns,Geopolitical risk,Predictability,Trading strategies
AI 理解论文
溯源树
样例
生成溯源树,研究论文发展脉络
Chat Paper
正在生成论文摘要