This paper evaluates the performance of carry trade strategies with macro fundamentals in a Markov switching dynamic factor augmented regression framework and compares the performance statistics with the benchmark model of a random walk and momentum strategy. I make simulations with the Japanese...

In this study, the effects of GDP per capita growth rates, real exchange rates, Standard and Poor’s (S&P) sovereign ratings, the difference between Transition Economies’ (TE) interest rates and USA’s interest rates on TEs’ net portfolio inflows were analyzed. The results showed that GDP...

This study conducts out-of-sample tests for returns on individual currency investment strategies and the weights on the universe of these strategies. We focus upon five investment strategies: carry, momentum, value, dollar carry, and conditional FX correlation risk. The performances of our...

This paper develops a dynamic portfolio selection model incorporating economic uncertainty for business cycles. It is assumed that the financial market at each point in time is defined by a hidden Markov model, which is characterized by the overall equity market returns and volatility. The risk...

This paper investigates the limit properties of mean-variance (mv) and arbitrage pricing (ap) trading strategies using a general dynamic factor model, as the number of assets diverge to infinity. It extends the results obtained in the literature for the exact pricing case to two other cases of...

This paper characterizes the asymptotic behaviour, as the number of assets gets arbitrarily large, of the portfolio weights for the class of tangency portfolios belonging to the Markowitz paradigm. It is assumed that the joint distribution of asset returns is characterized by a general factor...

We propose a conditional model of asset returns in the presence of common factors and downside risk. Specifically, we generalize existing latent factor models in three ways: we show how to estimate the threshold which identifies the 'disappointment' event triggering the bad state of the world; we...