Advanced Search
MyIDEAS: Login to save this article or follow this journal

Market Microstructure and the Profitability of Currency Trading

Contents:

Author Info

  • Carol Osler

    ()
    (International Business School, Brandeis University, Waltham, Massachusetts 02453)

Registered author(s):

    Abstract

    Currency trading is a vast and highly profitable business. This review examines the profitability of two popular currency trading strategies in light of currency-market microstructure research. The carry-trade strategy involves borrowing a low-interest currency and investing the proceeds in a high-interest currency. Technical trading strategies are determined exclusively on the basis of past asset prices and trading volumes. Under the efficient markets hypothesis, neither of these approaches to speculative trading should produce excess returns. The review shows that the profitability of carry-trade investing and technical trading strategies can represent rational long-run equilibria given the structure of currency markets and the incentives and constraints faced by traders.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev-financial-110311-101726
    Download Restriction: Full text downloads are only available to subscribers. Visit the abstract page for more information.

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Bibliographic Info

    Article provided by Annual Reviews in its journal Annual Review of Financial Economics.

    Volume (Year): 4 (2012)
    Issue (Month): 1 (October)
    Pages: 469-495

    as in new window
    Handle: RePEc:anr:refeco:v:4:y:2012:p:469-495

    Contact details of provider:
    Postal: Annual Reviews 4139 El Camino Way Palo Alto, CA 94306, USA
    Web page: http://www.annualreviews.org

    Order Information:
    Web: http://www.annualreviews.org/action/ecommerce

    Related research

    Keywords: carry trade; technical analysis; skewness; liquidity;

    Find related papers by JEL classification:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:anr:refeco:v:4:y:2012:p:469-495. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (http://www.annualreviews.org).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.