| Abstract: |
We study the cross-sectional variation of carry-trade-generated currency
excess returns in terms of their exposure to global macroeconomic fundamental
risk. The risk factor is the cross-country high-minus-low conditional skewness
of the unemployment rate gap. It gives a measure of global macroeconomic
uncertainty and is robustly priced in currency excess returns. A widening of
the high-minus-low skewness of the unemployment rate gap signifies increasing
divergence, disparity, and inequality of economic performance across countries. |