Economics at your fingertips  

The role of asymmetry and dynamics in carry trade and general financial markets

Chang‐Che Wu, MeiChi Huang and Chih‐Chiang Wu

The Financial Review, 2021, vol. 56, issue 2, 331-353

Abstract: This study investigates asymmetric dependence and its dynamics across returns to carry trades, stocks, and bonds using a copula‐based model. We show evidence for a significant increase in carry trade‐stock dependence and substantially negative carry trade‐bond and stock‐bond comovements since the 2007–2008 global financial crisis. We also assess the out‐of‐sample predictability of dependence in the context of asset‐allocation strategies, and find that risk‐averse investors obtain significant economic values by incorporating asymmetry and dynamics into dependence timing, particularly in the 2007–2008 crisis. These findings provide new implications for asset‐allocation strategies and risk management during turbulent market phases.

Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0732-8516

Access Statistics for this article

The Financial Review is currently edited by Cynthia J. Campbell and Arnold R. Cowan

More articles in The Financial Review from Eastern Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().

Page updated 2022-05-28
Handle: RePEc:bla:finrev:v:56:y:2021:i:2:p:331-353