In this paper, we study the effectiveness of carry trade strategies during and after the financial crisis using a flexible approach to modeling currency returns. We decompose the currency returns into multiplicative sign and absolute return components, which exhibit much greater predictability...

This paper provides an empirical investigation of the time-series predictive ability of foreign exchange risk measures on the return to the carry trade, a popular investment strategy that borrows in low-interest currencies and lends in high-interest currencies. Using quantile regressions, we...

This paper studies the time-series predictability of currency carry trades, constructed by selecting currencies to be bought or sold against the U.S. dollar, based on forward discounts. Changes in a commodity index, currency volatility and, to a lesser extent, a measure of liquidity predict...

I use forward-looking information available in stock market volatility indices to predict forex returns. In particular, I find that equity variance risk premiums (VRPs) — the difference between the risk-neutral and statistical expectations of market return variation — predict forex returns...

Modelling and forecasting of asset volatility and covariance is of prime importance in the construction of portfolios. In this paper, we present a generalised multi-factor model that incorporates heteroskedasticity and dependence in the idiosyncratic error terms. We apply this model to...