Princeton University's CEPS Series

Princeton University has a series of working papers called CEPS, referring to the "Center for Economic Policy Studies". Amongst these are papers by Burton Malkiel on "Bubbles in Asset Prices" (January 2010) and "The EMH and its Critics" (April 2003).

The World Price of Foreign Exchange Risk

Bernard Dumas is a Professor at INSEAD specialising in International Finance. Together with Bruno Solnik, a professor at HEC Paris, he published a paper in 1995 in the Journal of Finance (one of the most widely-cited academic journals in finance). It tackles the problem of making asset-pricing models ("APM"s) international. Basically the concept is if you own international assets (which will be defined later), the risk premia in your calculations must factor in the fact the covariances of assets with exchange rates as well as the covariance with the market portfolio (the new premia being present due to deviations from purchasing power parity). This is how, for example, we have the notion of an "international" CAPM versus a "classic" CAPM. The paper looks at testing an international APM in conditional form i.e. model for expected return conditional on current knowledge on interest rates, equity prices and so forth. Conditional expectation is critical here.