TY  - JOUR
AU  - Burnside,Craig
TI  - The Cross-Section of Foreign Currency Risk Premia and Consumption Growth Risk: A Comment
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13129
PY  - 2007
Y2  - May 2007
UR  - http://www.nber.org/papers/w13129
L1  - http://www.nber.org/papers/w13129.pdf
N1  - Author contact info:
A. Craig Burnside
Department of Economics
Duke University
213 Social Sciences Building
Durham, NC 27708-0097
Tel: 919/660-1808
Fax: 919/684-8974
E-Mail: burnside@econ.duke.edu
AB  - Lustig and Verdelhan (2007) argue that the excess returns to borrowing US dollars and lending in foreign currency "compensate US investors for taking on more US consumption growth risk," yet these excess returns are all approximately uncorrelated with the consumption risk factors they study.  Hence, their model cannot explain the cross-sectional variation of the returns.  Their positive assessment results from allowing for a large constant in the model, and from ignoring sampling uncertainty in estimated betas used as explanatory variables in cross-sectional regressions that determine estimated consumption risk premia.
ER  -