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The profitability of carry trades

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  • Jose Olmo

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  • Keith Pilbeam

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Abstract

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Suggested Citation

  • Jose Olmo & Keith Pilbeam, 2009. "The profitability of carry trades," Annals of Finance, Springer, vol. 5(2), pages 231-241, March.
  • Handle: RePEc:kap:annfin:v:5:y:2009:i:2:p:231-241
    DOI: 10.1007/s10436-008-0098-2
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    File URL: http://hdl.handle.net/10.1007/s10436-008-0098-2
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    References listed on IDEAS

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    1. Sweeney, Richard J, 1986. " Beating the Foreign Exchange Market," Journal of Finance, American Finance Association, vol. 41(1), pages 163-182, March.
    2. Burnside, Craig & Eichenbaum, Martin & Kleshchelski, Isaac & Rebelo, Sérgio, 2006. "The Returns to Currency Speculation," CEPR Discussion Papers 5883, C.E.P.R. Discussion Papers.
    3. Lewis, Karen K., 1995. "Puzzles in international financial markets," Handbook of International Economics,in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 37, pages 1913-1971 Elsevier.
    4. Domowitz, Ian & Hakkio, Craig S., 1985. "Conditional variance and the risk premium in the foreign exchange market," Journal of International Economics, Elsevier, vol. 19(1-2), pages 47-66, August.
    5. Kenneth A. Froot & Jeffrey A. Frankel, 1989. "Forward Discount Bias: Is it an Exchange Risk Premium?," The Quarterly Journal of Economics, Oxford University Press, vol. 104(1), pages 139-161.
    6. Lucio Sarno & Giorgio Valente & Hyginus Leon, 2006. "Nonlinearity in Deviations from Uncovered Interest Parity: An Explanation of the Forward Bias Puzzle," Review of Finance, European Finance Association, vol. 10(3), pages 443-482, September.
    7. Froot, Kenneth A & Thaler, Richard H, 1990. "Foreign Exchange," Journal of Economic Perspectives, American Economic Association, vol. 4(3), pages 179-192, Summer.
    8. Baillie, Richard T. & Bollerslev, Tim, 2000. "The forward premium anomaly is not as bad as you think," Journal of International Money and Finance, Elsevier, vol. 19(4), pages 471-488, August.
    9. Engel, Charles, 1996. "The forward discount anomaly and the risk premium: A survey of recent evidence," Journal of Empirical Finance, Elsevier, vol. 3(2), pages 123-192, June.
    10. Robert P. Flood & Andrew K. Rose, 2002. "Uncovered Interest Parity in Crisis," IMF Staff Papers, Palgrave Macmillan, vol. 49(2), pages 1-6.
    11. Alex Maynard & Peter C. B. Phillips, 2001. "Rethinking an old empirical puzzle: econometric evidence on the forward discount anomaly," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(6), pages 671-708.
    12. Cavaglia, Stefano M F G & Verschoor, Willem F C & Wolff, Christian C P, 1994. "On the Biasedness of Forward Foreign Exchange Rates: Irrationality or Risk Premia?," The Journal of Business, University of Chicago Press, vol. 67(3), pages 321-343, July.
    13. Boothe, Paul & Longworth, David, 1986. "Foreign exchange market efficiency tests: Implications of recent empirical findings," Journal of International Money and Finance, Elsevier, vol. 5(2), pages 135-152, June.
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    Citations

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    Cited by:

    1. Keith Pilbeam & Jose Olmo, 2011. "The forward discount puzzle and market efficiency," Annals of Finance, Springer, vol. 7(1), pages 119-135, February.
    2. Vistesen, Claus, 2008. "Of Low Yielders and Carry Trading – the JPY and CHF as Market Risk Sentiment Gauges," MPRA Paper 9952, University Library of Munich, Germany.
    3. Claus VISTESEN, 2009. "Carry Trade Fundamentals And The Financial Crisis 2007-2010," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 4(2(8)_ Sum).

    More about this item

    Keywords

    Carry-trade; Efficient market hypothesis; Profitability tests; Uncovered interest parity; F30; F31; F37;

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications

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