Discussion paper

DP15054 U.S. Populist Rhetoric and Currency Returns

We develop a novel measure of U.S. populist rhetoric. Aggregate Populist Rhetoric (APR) Index
spikes around populist events. We decompose the APR Index into sub-indices. We show that
APR Index and International Relations sub-index are negatively priced in the cross-section of
currency excess returns. Currencies that perform well (badly) when U.S. populist rhetoric
is high yield low (high) expected excess returns. Investors require high risk premium for
holding currencies which underperform in times of rising U.S. populist rhetoric, especially
in the post-crisis period. A long-short strategy that buys (sells) currencies with high (low)
exposure to U.S. populism offers strong diversification benefits.


Filippou, I, A Gozluklu, M Nguyen and M Taylor (2020), ‘DP15054 U.S. Populist Rhetoric and Currency Returns‘, CEPR Discussion Paper No. 15054. CEPR Press, Paris & London. https://cepr.org/publications/dp15054