Working Paper Series
Macroeconomic Announcements and Foreign Exchange Risk
Ding Du, NAU-FCB
Ou Hu, Youngstown State University
Xiaobing Zhao, NAU-FCB
Savor and Wilson (2013a, 2013b) suggest that the tradeoff between state variable risk and asset returns underlying standard asset-pricing theories should be particularly strong on prescheduled macroeconomic announcement days, because important information about the state of the economy is revealed at such times. We apply this insight to foreign-exchange risk, and find robust evidence that foreign-exchange risk is priced on prescheduled macroeconomic announcement days. Our results make important contributions to both international finance and empirical asset-pricing literature.