|Marhaug, Vilde Rivers
|Masteroppgave(MSc) in Master of Science in Business, Finance - Handelshøyskolen BI, 2018
|Borrowing in low-interest countries and investing in high-interest countries is
recognized as a “carry trade” strategy, where the return is identified as the
currency risk premium. In this paper, we examine if a more extensive
disagreement among the analysts prior to the release of macroeconomic variables
will reward investors with a higher currency risk premium. We used data on 14
different currencies with respect to the US-dollar, and constructed a global macro
uncertainty index denoted by inflation rate and the unemployment rate in the
Our results indicate that there is ample evidence that investors demand
compensation for bearing more risk and for investing in currencies with higher
analyst dispersion in the macro environment.
|Does analyst dispersion on macro economic factors affect the foreign exchange risk premium?