G1 - General Financial Markets
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Time-Varying Crash Risk: The Role of Stock Market Liquidity
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. -
Global Macro Risks in Currency Excess Returns
We study a cross section of carry-trade-generated currency excess returns in terms of their exposure to global fundamental macroeconomic risk.