Active Currency Investing and Performance Benchmarks
There are no established benchmarks for evaluating currency investment manager performance. Some analysts have suggested that known investing styles like momentum, purchasing power parity, and carry serve as benchmarks. Challenges for this approach include: there is no market portfolio; there are many alternative generic factor constructions; different constructions of the same factor may have low correlations; the 3 factors may not provide diversification; and there is no “buy and hold” in the FX market. An evaluation of professional currency managers’ returns indicates that they are often generated independently from the generic style factors. Skill in timing is what investors should pay for and some managers demonstrate superior skill in timing the factors. Managers are also skilled at minimizing drawdowns relative to the generic factors. The use of generic style factors may be a worst case scenario instead of returns to which an FX investor may aspire.
|Date of creation:||2010|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Menkhoff, Lukas & Taylor, Mark P., 2006.
"The Obstinate Passion of Foreign Exchange Professionals: Technical Analysis,"
Hannover Economic Papers (HEP)
dp-352, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
- Lukas Menkhoff & Mark P. Taylor, 2007. "The Obstinate Passion of Foreign Exchange Professionals: Technical Analysis," Journal of Economic Literature, American Economic Association, vol. 45(4), pages 936-972, December.
- Menkhoff, Lukas & Taylor, Mark P., 2006. "The Obstinate Passion of Foreign Exchange Professionals : Technical Analysis," The Warwick Economics Research Paper Series (TWERPS) 769, University of Warwick, Department of Economics.
- Michael Melvin & Mark P. Taylor, 2009.
"The Crisis in the Foreign Exchange Market,"
CESifo Working Paper Series
2707, CESifo Group Munich.
- Momtchil Pojarliev & Richard M. Levich, 2007. "Do Professional Currency Managers Beat the Benchmark?," NBER Working Papers 13714, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_3052. 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: (Julio Saavedra)
If references are entirely missing, you can add them using this form.