Global Macro Risks in Currency Excess Returns

NBER Working Paper No. 23764

Issued in September 2017

NBER Program(s):Asset Pricing, International Finance and Macroeconomics



We study the cross-sectional variation of carry-trade-generated currency excess returns in terms of their exposure to global macroeconomic fundamental risk. The risk factor is the cross-country high-minus-low conditional skewness of the unemployment rate gap. It gives a measure of global macroeconomic uncertainty and is robustly priced in currency excess returns. A widening of the high-minus-low skewness of the unemployment rate gap signifies increasing divergence, disparity, and inequality of economic performance across countries.

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Document Object Identifier (DOI): 10.3386/w23764

Published: Kimberly A. Berg & Nelson C. Mark, 2017. "Global macro risks in currency excess returns," Journal of Empirical Finance, . citation courtesy of

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