The asymmetry in carry trade and the U.S. dollar

Chih-Chiang Wu and Chang-Che Wu

The Quarterly Review of Economics and Finance, 2017, vol. 65, issue C, 304-313

Abstract: This study aims to investigate the potential asymmetric dependence between the carry trade and U.S. dollar returns. Empirical results demonstrate that the U.S. dollar becomes a safe haven and provides protection for carry trade investors to avoid the crash risk during the 2007–2008 global financial crisis and the 2010–2011 Eurozone sovereign debt crisis. The asymmetric dependence is not only statistically significant, but this information also helps investors to generate extra 14–2166 annualized basis points from the perspective of an asset-allocation decision. Our findings provide important financial implications for currency investors in asset allocation and risk management.

Keywords: Asymmetric dependence; Carry trade; Copula; Safe haven; U.S. dollar (search for similar items in EconPapers)
JEL-codes: C10 C58 F31 G11 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:65:y:2017:i:c:p:304-313

DOI: 10.1016/j.qref.2016.12.004

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