Exchange rate risk compensation in international ETFs
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- Master Thesis 
We study exchange rate risk compensation in international ETFs from the perspective of a U.S. investor by using the Dollar and Carry currency risk factors. We find that U.S. investors are compensated for taking currency risk. In particular, when we estimate risk factor loadings conditionally, using 60-month rolling windows, in the sample period between January 1997 and June 2015, taking an additional unit of Dollar risk is associated with 0.94 percentage points more excess return per annum, while an additional unit of Carry risk is associated with an increase in excess return of 4.74 percentage points per annum.