IDEAS home Printed from
   My bibliography  Save this article

The Profitability of Carry Trade - La redditività del carry trade


  • Moosa, Imad A.

    () (Department of Accounting and Finance, Monash University)


The profitability of carry trade is investigated using six currency combinations and historical data covering the period December 1999-June 2006. Hypothesis testing and Monte Carlo simulations produce results that cast doubt on the profitability of carry trade, as there is mostly a fifty-fifty chance that profit can be made from a single carry trade operation. The results also show that carry trade is not an exclusively yen-based operation, in the sense that currency combinations not involving the yen can be as profitable as combinations involving the yen. Because the interest rate differential is not the only factor determining the profitability of carry trade, a proper criterion for selecting the underlying positions must embody both the interest rate differential and exchange rate volatility. It is concluded that over-enthusiasm about carry trade is a reflection of herd behaviour. - In questo studio si analizza la redditività del carry trade utilizzando sei combinazioni di valute riferite al periodo dicembre 1999-giugno 2006. I risultati dei test e le simulazioni Monte Carlo pongono dei dubbi sulla redditività del carry trade, in quanto la probabilità di ottenere guadagni da una singola operazione è del 50 per cento. Tali risultati mostrano anche che il carry trade non è una pratica da basare esclusivamente sullo yen, perchè le combinazioni di valute che non includono lo yen possono essere redditizie al pari di quelle che lo comprendono. Poiché il differenziale del tasso di interesse non è il solo fattore che determina la redditività del carry trade, un criterio opportuno di selezione deve incorporare anche la volatilità del cambio. Si conclude che l’eccesso di entusiasmo circa il carry trade è il risultato di un herd behaviour.

Suggested Citation

  • Moosa, Imad A., 2010. "The Profitability of Carry Trade - La redditività del carry trade," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 63(3), pages 361-380.
  • Handle: RePEc:ris:ecoint:0602

    Download full text from publisher

    File URL:
    File Function: Full text
    Download Restriction: no

    References listed on IDEAS

    1. Menzie D. Chinn & Guy Meredith, 2004. "Monetary Policy and Long-Horizon Uncovered Interest Parity," IMF Staff Papers, Palgrave Macmillan, vol. 51(3), pages 409-430, November.
    2. Gabriele Galati & Michael Melvin, 2004. "Why has FX trading surged?," BIS Quarterly Review, Bank for International Settlements, December.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Bhatti, Razzaque H., 2014. "The existence of uncovered interest parity in the CIS countries," Economic Modelling, Elsevier, vol. 40(C), pages 227-241.

    More about this item


    Carry Trade; Uncovered Interest Parity;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:ecoint:0602. 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: (Angela Procopio). General contact details of provider: .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.