Carry Trade and Momentum in Currency Markets

Craig Burnside, Martin Eichenbaum and Sergio Rebelo ()

Annual Review of Financial Economics, 2011, vol. 3, issue 1, 511-535

Abstract: We examine the empirical properties of the payoffs to two popular currency speculation strategies: the carry trade and momentum. We review three possible explanations for the apparent profitability of these strategies. The first is that speculators are being compensated for bearing risk. The second is that these strategies are vulnerable to rare disasters or peso problems. The third is that there is price pressure in currency markets.

Keywords: uncovered interest parity; exchange rates; currency speculation; rare disaster; peso problem; price pressure (search for similar items in EconPapers)
JEL-codes: F31 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (122)

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Related works:
Working Paper: Carry Trade and Momentum in Currency Markets (2011)
Working Paper: Carry Trade and Momentum in Currency Markets (2011)
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