Department of Economics and Business Economics

Cross-sectional return dispersion and currency momentum

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Cross-sectional return dispersion and currency momentum. / Eriksen, Jonas Nygaard.

In: Journal of Empirical Finance, Vol. 53, 2019, p. 91-108.

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaperJournal articleResearchpeer-review

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Eriksen, Jonas Nygaard. / Cross-sectional return dispersion and currency momentum. In: Journal of Empirical Finance. 2019 ; Vol. 53. pp. 91-108.

Bibtex

@article{0e2b6ffa0983429f92fba97e9af0729d,
title = "Cross-sectional return dispersion and currency momentum",
abstract = "I assess the relation between cross-sectional return dispersion in foreign exchange (FX) markets and currency momentum. I find that cross-sectional dispersion is priced in the cross-section of currency momentum returns and that an unexpected increase in cross-sectional dispersion is associated with positive (negative) excess returns to winner (loser) currencies. This mechanism can be related to monetary policy conditions. The empirical findings are robust to the inclusion of traditionalcurrency risk factors, liquidity and market volatility variables, and transaction costs. Finally, the explanatory ability of cross-sectional dispersion extends to broader cross-sections of currency portfolios and to individual currencies.",
keywords = "Foreign exchange, currency momentum, return dispersion, asset pricing",
author = "Eriksen, {Jonas Nygaard}",
year = "2019",
doi = "10.1016/j.jempfin.2019.07.002",
language = "English",
volume = "53",
pages = "91--108",
journal = "Journal of Empirical Finance",
issn = "0927-5398",
publisher = "Elsevier BV",

}

RIS

TY - JOUR

T1 - Cross-sectional return dispersion and currency momentum

AU - Eriksen, Jonas Nygaard

PY - 2019

Y1 - 2019

N2 - I assess the relation between cross-sectional return dispersion in foreign exchange (FX) markets and currency momentum. I find that cross-sectional dispersion is priced in the cross-section of currency momentum returns and that an unexpected increase in cross-sectional dispersion is associated with positive (negative) excess returns to winner (loser) currencies. This mechanism can be related to monetary policy conditions. The empirical findings are robust to the inclusion of traditionalcurrency risk factors, liquidity and market volatility variables, and transaction costs. Finally, the explanatory ability of cross-sectional dispersion extends to broader cross-sections of currency portfolios and to individual currencies.

AB - I assess the relation between cross-sectional return dispersion in foreign exchange (FX) markets and currency momentum. I find that cross-sectional dispersion is priced in the cross-section of currency momentum returns and that an unexpected increase in cross-sectional dispersion is associated with positive (negative) excess returns to winner (loser) currencies. This mechanism can be related to monetary policy conditions. The empirical findings are robust to the inclusion of traditionalcurrency risk factors, liquidity and market volatility variables, and transaction costs. Finally, the explanatory ability of cross-sectional dispersion extends to broader cross-sections of currency portfolios and to individual currencies.

KW - Foreign exchange

KW - currency momentum

KW - return dispersion

KW - asset pricing

UR - http://www.scopus.com/inward/record.url?scp=85068605128&partnerID=8YFLogxK

U2 - 10.1016/j.jempfin.2019.07.002

DO - 10.1016/j.jempfin.2019.07.002

M3 - Journal article

VL - 53

SP - 91

EP - 108

JO - Journal of Empirical Finance

JF - Journal of Empirical Finance

SN - 0927-5398

ER -