When Risk Goes Unrewarded
Risk-based asset pricing theory suggests, simply, that assets bearing a higher risk should compensate investors with higher returns.
While most papers investigating the risk-return relationship of assets are focused on equity markets, surprisingly few studies explore this phenomenon in currency markets (which are among the deepest and most liquid markets in the world). In fact, the FX markets are larger than the global equity markets, at least in terms of traded volume.
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