Positive Mean Currency Returns
In this paper, we report evidence that mean currency returns are positive for both a domestic investor in a foreign currency and a foreign investor in a domestic currency. A shared currency gain creates a positive volatility factor for both. Volatility dominates other return determinants that have opposite impacts on an exchange rate and its inverse to produce positive average returns we find in excess of one percent per annum. Positive mean currency returns impact the global asset allocation of investors to accumulate to a large fraction of wealth creation over time. Currency returns are also large given the a priori expectation of investors that they average to zero.