G1 - General Financial Markets

• Time-Varying Crash Risk: The Role of Stock Market Liquidity

  Staff Working Paper 2016-35 Peter Christoffersen, Bruno Feunou, Yoontae Jeon, Chayawat Ornthanalai

  We estimate a continuous-time model with stochastic volatility and dynamic crash probability for the S&P 500 index and find that market illiquidity dominates other factors in explaining the stock market crash risk. While the crash probability is time-varying, its dynamic depends only weakly on return variance once we include market illiquidity as an economic variable in the model.

  Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Econometric and statistical methods, Financial stability JEL Code(s): G, G0, G01, G1, G12

• Global Macro Risks in Currency Excess Returns

  Staff Working Paper 2016-32 Kimberly Berg, Nelson C. Mark

  We study a cross section of carry-trade-generated currency excess returns in terms of their exposure to global fundamental macroeconomic risk.

  Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Exchange rates, Interest rates JEL Code(s): E, E2, E21, E4, E43, F, F3, F31, G, G1, G12