Economic, Financial and Fundamental Global Risk in and Out of the Emu

Fuqua School of Business Working Paper No. 9901

52 Pages Posted: 28 Apr 1999

See all articles by Wayne E. Ferson

Wayne E. Ferson

University of Southern California; National Bureau of Economic Research (NBER)

Campbell R. Harvey

Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: February 1999

Abstract

We explore the different factors that drive expected returns in world markets. Our research offers two innovations. First, the introduction of the Euro currency unit greatly reduces the complexity of including foreign exchange risk in asset pricing models. We use a synthetic Euro excess return along with a Yen excess return to assess country equity sensitivities to currency risk factors. Second, when combining the currency factors with a group of economic factors, we measure the incremental information in the factor proposed in Fama and French (1998). We find that a global price-to-book factor offers little additional explanatory power over and above a model that includes economic risk factors.

JEL Classification: F3, G0, G1

Suggested Citation

Ferson, Wayne E. and Harvey, Campbell R., Economic, Financial and Fundamental Global Risk in and Out of the Emu (February 1999). Fuqua School of Business Working Paper No. 9901, Available at SSRN: https://ssrn.com/abstract=152889 or http://dx.doi.org/10.2139/ssrn.152889

Wayne E. Ferson

University of Southern California ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States

HOME PAGE: http://www-rcf.usc.edu/~ferson/

National Bureau of Economic Research (NBER)

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Campbell R. Harvey (Contact Author)

Duke University - Fuqua School of Business ( email )

Box 90120
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United States
919-660-7768 (Phone)

HOME PAGE: http://www.duke.edu/~charvey

National Bureau of Economic Research (NBER)

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