An increase in a country’s sovereign risk, as measured by credit default swap spreads, is accompanied contemporaneous depreciation of its currency and an volatility. The relation between excess returns risk mainly driven expectations (rather than distress premia) exposure to global shocks also emerges predictive setting for premia. We show that factor priced the cross-section it not subsumed ca...

 Given companies’ dynamic responses to expected exchange rate changes, this article improves on current methods of measuring exposure to foreign exchange rate changes by breaking down the spot exchange rate changes into expected changes and unexpected changes. The currency risk exposure coefficients resulting from an empirical analysis of Shanghai Stock Exchange A share listed companies on wh...