We find important differences in dollar-based and dollar-neutral G10 carry trades. Dollar-neutral trades have positive average returns, are highly negatively skewed, are correlated with risk factors, and exhibit considerable downside risk. In contrast, a diversified dollar-carry portfolio has a...

We examine carry trade returns formed from the G10 currencies. Performance attributes depend on the base currency. Dynamically spread-weighting and risk-rebalancing positions improves performance. Equity, bond, FX, volatility, and downside equity risks cannot explain profitability....

In this paper we analyze CBOE VIX futures price time series data from Mar. 2004 to Feb. 2008. We derive a new pricing framework for VIX futures that is convenient to study variance term structure dynamics. Our main contribution to existing literature is the identification of the number of...

We test whether bear market risk - time-variation in the probability of future bear market states - is priced. We construct an Arrow-Debreu security that pays off in bear market states (AD Bear) from traded S&P 500 index options and use its returns to measure bear market risk. We find that bear...

I propose a nested hypothesis test of competing mechanisms that explain return momentum and reversal using seemingly opposite biases: underreaction or delayed overreaction in investors' expectations of cash flows. Using analysts' forecasts as a proxy for these expectations, this study traces the...