| 来源类型 | Discussion paper |
| 规范类型 | 论文 |
| 来源ID | DP8291 |
| DP8291 Carry Trades and Global Foreign Exchange Volatility | |
| Lukas Menkhoff; LUCIO SARNO; Paul Schrimpf; Maik Schmeling | |
| 发表日期 | 2011-03-14 |
| 出版年 | 2011 |
| 语种 | 英语 |
| 摘要 | We investigate the relation between global foreign exchange (FX) volatility risk and the cross-section of excess returns arising from popular strategies that borrow in low interest rate currencies and invest in high-interest rate currencies, so-called 'carry trades'. We find that high interest rate currencies are negatively related to innovations in global FX volatility and thus deliver low returns in times of unexpected high volatility, when low interest rate currencies provide a hedge by yielding positive returns. Our proxy for global FX volatility risk captures more than 90% of the cross-sectional excess returns in five carry trade portfolios. In turn, these results provide evidence that there is an economically meaningful risk-return relation in the FX market. Further analysis shows that liquidity risk also matters for expected FX returns, but to a lesser degree than volatility risk. Finally, exposure to our volatility risk proxy also performs well for pricing returns of other cross sections in foreign exchange, U.S. equity, and corporate bond markets. |
| 主题 | Financial Economics ; International Macroeconomics |
| 关键词 | Carry trade Forward premium puzzle Liquidity Volatility |
| URL | https://cepr.org/publications/dp8291 |
| 来源智库 | Centre for Economic Policy Research (United Kingdom) |
| 资源类型 | 智库出版物 |
| 条目标识符 | http://119.78.100.153/handle/2XGU8XDN/537127 |
| 推荐引用方式 GB/T 7714 | Lukas Menkhoff,LUCIO SARNO,Paul Schrimpf,et al. DP8291 Carry Trades and Global Foreign Exchange Volatility. 2011. |
| 条目包含的文件 | 条目无相关文件。 | |||||
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