Background: I am trying to replicate some results from the Betting Against Beta paper by Frazzini & Pedersen (FP). (http://www.econ.yale.edu/~af227/pdf/Betting%20Against%20Beta%20-%20Frazzini%20and%20Pedersen.pdf)
Specifically, I am trying to recreate the results for the Danish equity market, which has the local currency DKK.
In section 3 of the paper, FP state:
All returns are in US dollars, and excess returns are above the US Treasury bill rate.
This follows a paragraph about the international equities analysis, so I assume it specifically applies to international equities.
Betas are calculated against the MSCI Denmark index, which, like the stocks I am analysing, is listed in DKK.
My question is two-fold:
- Does the statement from the paper imply that I need to convert all daily returns for every stock and the index to USD?
- If so, do I then need to get the USD/DKK exchange rate for every day (data point) I have stock/index returns for, multiply this by the individual daily stock prices, and then calculate returns anew?