Location, location, location: currency effects and return predictability?
journal contributionposted on 22.06.2016 by Steven J. Jordan, Andrew Vivian, Mark Wohar
Any type of content formally published in an academic journal, usually following a peer-review process.
Most international financial market studies that compare across countries utilize the US dollar as the common numeraire. We explore the little studied question of the appropriate choice for the base currency and ask if currency choice can affect the final conclusion of whether predictability exists. We provide empirical results for stock return predictability that demonstrate the importance of the numeraire. For example, the existence (absence) of predictability for a US investor does not necessarily imply the existence (absence) of predictability for other foreign investors.
- Business and Economics