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The time-varying behaviour of the market and exchange risk betas of the US sectoral returns are estimated using a random walk process in connection with the Kalman filter. The empirical findings, in general, show that the market risks tend to shrink over longer time horizons, and that during the dot-com bubble burst and during the subprime financial crisis they tended to rise. During these crises they rose most notably in those industries most related to the crisis. Regarding exchange risk, industry returns appear in this study to be positively related to dollar appreciation, but that relationship declines with longer time horizons, in some cases resulting ultimately in a negative relationship between the US dollar and the industry returns. This latter result is consistent with the idea that the effect of a US dollar appreciation on competitiveness of the US exports becomes stronger with the longer time horizons. During the subprime financial crisis, the relation between excess returns and the exchange rate tended to fall, as was notably the case for the Technology sector during the dot-com bubble burst.
