Showing 1 - 10 of 18,003
We analyze the returns to targeting the Australian, New Zealand and South African currencies, through Japanese yen-funded forward market speculation – with a particular focus on the South African rand. Targeting the rand through forward currency speculation generates returns which are as...
Persistent link: https://www.econbiz.de/10013117684
production. We develop a theory of currency markets under funding constraints that has several testable implications. For … instance, as funding constraints start to bind, our theory predicts that both the investment and funding currencies drop …. In line with theory, funding risk forecasts currency crashes in the carry trade long and short countries …
Persistent link: https://www.econbiz.de/10013244299
We sort currencies by countries' consumption growth over the past four quarters. Currency portfolios of countries experiencing consumption booms have higher Sharpe ratios than those of countries going through a consumption-based recession. A carry strategy that goes short in countries that are...
Persistent link: https://www.econbiz.de/10009752999
Carry returns have been widely observed in the FX market. This study exploits the common information embedded in several factors previously identified as relevant to carry trade returns. We find that the extracted common factor successfully models the time series and cross-sectional...
Persistent link: https://www.econbiz.de/10012978293
Persistent link: https://www.econbiz.de/10001434313
We quantify crash risk in currency returns. To accomplish this task, we develop and estimate an empirical model of exchange rate dynamics using daily data for four currencies relative to the US dollar: the Australian dollar, the British pound, the Swiss franc, and the Japanese yen. The model...
Persistent link: https://www.econbiz.de/10013037072
We study the properties of foreign exchange risk premiums that can explain the forward bias puzzle, defined as the tendency of high-interest rate currencies to appreciate rather than depreciate. These risk premiums arise endogenously from the no-arbitrage condition relating the term structure of...
Persistent link: https://www.econbiz.de/10013009171
Persistent link: https://www.econbiz.de/10003699565
This paper investigates the importance of commodity prices for the returns of currency carry trade portfolios. We adopt a recently developed empirical factor model to capture commodity commonalities and heterogeneity. Agricultural material and metal price risk factors are found to have...
Persistent link: https://www.econbiz.de/10012870354
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...
Persistent link: https://www.econbiz.de/10012972833