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How much asymmetry is there in bond returns and exchange rates?

  • Ippei Fujiwara
  • Lena Mareen Körber
  • Daisuke Nagakura

We measure asymmetries in the distribution of bond returns and exchange rates and test their statistical significance. Asymmetries are sizable when measured by the coefficient of skewness, a measure that is highly affected by outliers. In contrast, robustly measured asymmetries to outliers often disagree in sign or size, implying that much of the asymmetries measured by the coefficient of skewness can be attributed to extreme observations. Asymmetries in many government bonds returns are only statistically significant according to tests based on the coefficient of skewness.> ; On the contrary, only tests based on robust measures indicate statistically significant asymmetries in the exchanges rates of Japanese yen, a major funding currency for carry trades, as well as in New Zealand dollar and Australian dollar, major investing currencies for carry trades. This observation suggests that sources of asymmetry in carry trades and in government bond returns can be fundamentally different.

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File URL: http://www.dallasfed.org/assets/documents/institute/wpapers/2011/0093.pdf
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Paper provided by Federal Reserve Bank of Dallas in its series Globalization and Monetary Policy Institute Working Paper with number 93.

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Date of creation: 2011
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Handle: RePEc:fip:feddgw:93
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