... converting to the foreign currency, lending at the foreign interest rate, and converting the proceeds back to dollars. The stock and bond indices are total market returns from Datastream, the interest ... excess returns for borrowing in US dollars, converting to the domestic currency, lending at the domestic interest rate, and converting the proceed back to dollars. The stock and bond returns are ... responsible for the views expressed in the paper and for any errors that may remain.2 Corresponding author: European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany; Tel:...