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dc.contributor.authorVerdelhan, Adrien Frederic
dc.date.accessioned2013-01-09T19:29:08Z
dc.date.available2013-01-09T19:29:08Z
dc.date.issued2010-01
dc.identifier.issn0022-1082
dc.identifier.issn1540-6261
dc.identifier.urihttp://hdl.handle.net/1721.1/76223
dc.description.abstractThis paper presents a model that reproduces the uncovered interest rate parity puzzle. Investors have preferences with external habits. Countercyclical risk premia and procyclical real interest rates arise endogenously. During bad times at home, when domestic consumption is close to the habit level, the representative investor is very risk averse. When the domestic investor is more risk averse than her foreign counterpart, the exchange rate is closely tied to domestic consumption growth shocks. The domestic investor therefore expects a positive currency excess return. Because interest rates are low in bad times, expected currency excess returns increase with interest rate differentials.en_US
dc.language.isoen_US
dc.publisherAmerican Finance Association/Wileyen_US
dc.relation.isversionofhttp://dx.doi.org/10.1111/j.1540-6261.2009.01525.xen_US
dc.rightsCreative Commons Attribution-Noncommercial-Share Alike 3.0en_US
dc.rights.urihttp://creativecommons.org/licenses/by-nc-sa/3.0/en_US
dc.sourceSSRNen_US
dc.titleA Habit-Based Explanation of the Exchange Rate Risk Premiumen_US
dc.typeArticleen_US
dc.identifier.citationVerdelhan, Adrien. “A Habit-Based Explanation of the Exchange Rate Risk Premium.” The Journal of Finance 65.1 (2010): 123–146.en_US
dc.contributor.departmentSloan School of Managementen_US
dc.contributor.mitauthorVerdelhan, Adrien Frederic
dc.relation.journalJournal of Financeen_US
dc.eprint.versionAuthor's final manuscripten_US
dc.type.urihttp://purl.org/eprint/type/JournalArticleen_US
eprint.statushttp://purl.org/eprint/status/PeerRevieweden_US
dspace.orderedauthorsVERDELHAN, ADRIENen
dc.identifier.orcidhttps://orcid.org/0000-0002-0319-5531
mit.licenseOPEN_ACCESS_POLICYen_US
mit.metadata.statusComplete


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