LAUSR

Abstract The intermediary capital risk (ICR) is recently perceived as an important indicator of economic activities and risk premiums. In this paper, we provide individual time-series predictability of ICR for exchange rates of twelve major currencies against US dollar, in both in-sample and out-of-sample settings. This predictive pattern is robust when controlling for macroeconomic variables. Further analysis shows that a simple linear regression is sufficient to capture the predictive performance. Our results imply that the ICR factor is a useful predictor for exchange rates.