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  • WPS 14-02

Working Paper Series

The Long-Run Component of Foreign Exchange Volatility and Stock Returns

Posted April 2014

Authors

Ding Du
Ou Hu

Abstract

The present paper explores the cross-sectional pricing power of foreign exchange volatility in the US stock market by decomposing it into short- and long-run components. Our approach is motivated by Bartov, Bodnar, and Kaul (1996). Empirically, we find supporting evidence that the long-run component of foreign exchange volatility is priced in the US stock market. Our findings have important implications for international finance and empirical asset pricing.

Download full working paper (PDF).

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W. A. Franke College Of Business
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