This paper provides a novel investigation into how currency excess returns react to terrorist attacks. We construct a terrorism risk factor and demonstrate that it significantly matters to excess returns of both carry trade and individual currencies. Furthermore, we form a currency portfolio by simply buying terrorism-sensitive currencies and selling less terrorism-sensitive currencies, which yields economically positive and statistically significant returns. It has shown that this newly proposed terrorism risk factor could provide a marginal improvement for exchange rate pricing facing terrorist attacks.

中文翻译：

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恐怖袭击对货币超额收益有影响吗？

本文对货币超额收益如何应对恐怖袭击进行了新颖的调查。我们构建了一个恐怖主义风险因素，并证明它对套利交易和单个货币的超额收益都非常重要。此外，我们通过简单地购买对恐怖主义敏感的货币并出售对恐怖主义不太敏感的货币来形成货币投资组合，这会产生经济上积极且具有统计意义的回报。研究表明，这个新提出的恐怖主义风险因素可以为面临恐怖袭击的汇率定价提供边际改善。