Empirical Economics https://doi.org/10.1007/s00181-020-01951-y Market news co-moments and currency returns Mohammadreza Tavakoli Baghdadabad 1 · Girijasankar Mallik 2 Received: 22 February 2019 / Accepted: 22 September 2020 © Springer-Verlag GmbH Germany, part of Springer Nature 2020 Abstract We propose three co-moments of the market returns’ cash-flow, and discount-rate shocks and examine empirically an intertemporal capital asset pricing model using the co-moments on currency returns as well as stock returns during Dec. 1983 to Dec. 2017. We find that our proposed model has explanatory power for both currency and stock portfolios. We find several common sources of market risk in currency and stock returns that are reflected in market news. Our findings show that the co-moments are related to currency risk premiums and outperform the well-known liquidity, dollar and HML risk factors. Keywords Market news · Cash-flow · Discount rate · Risk co-moments JEL Classification G12 · G32 1 Introduction One of the most important challenges in finance is to link asset returns with market risk factors. The literature shows that the existing market risk factors and their derived pricing models cannot exhibit jointly explanatory power for both currency and stock returns (Lettau et al. 2014; Atanasov and Nitschka 2015). It shows that the popular models developed for a specific asset class fail to price other asset classes (Lettau et al. 2014). To address this issue, Atanasov and Nitschka (2015) propose that the Electronic supplementary material The online version of this article (https://doi.org/10.1007/s00181-02 0-01951-y) contains supplementary material, which is available to authorized users. B Mohammadreza Tavakoli Baghdadabad M.tavakoli.b@top.edu.au Girijasankar Mallik G.Mallik@westernsydney.edu.au 1 Australian National Institute of Management and Commerce (IMC), Sydney, Australia 2 Business School, Western Sydney University, Sydney, Australia 123