HOW DOES CURRENCY RISK FROM THE EMERGING MARKETS AFFECT RETURNS OF THE U.S. INVESTORS?

Date created
2019-12
Authors/Contributors
Author: Zhang, Nan
Author: Lu, Ziying
Abstract
This paper demonstrates how U.S. stock returns correlate with emerging market stock returns in Brazil, China, Mexico, India and Turkey, and the correlation among these emerging market returns. The emerging market returns have two components: local currency stock market return and exchange rate return. The currency risk is driven by standard deviation and correlation. By breaking down the correlation and standard deviation into foreign exchange rate return and local stock return components, we conclude that emerging markets have diversification benefits.
Document
Description
MSc in Finance Project-Simon Fraser University.
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Copyright is held by the author(s).
Scholarly level
Peer reviewed?
No
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