Good Carry, Bad Carry

Geert Bekaert and George Panayotov

Journal of Financial and Quantitative Analysis, 2020, vol. 55, issue 4, 1063-1094

Abstract: We distinguish between “good” and “bad” carry trades constructed from Group of Ten (G-10) currencies. The good trades exhibit higher Sharpe ratios and sometimes positive return skewness, in contrast to the bad trades, which have both substantially lower Sharpe ratios and highly negative return skewness. Surprisingly, good trades do not involve the most typical carry currencies like the Australian dollar and Japanese yen. The distinction between good and bad carry trades significantly alters our understanding of currency carry trade returns, and invalidates, for example, explanations invoking return skewness and crash risk.

Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (23)

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
Working Paper: Good Carry, Bad Carry (2019)
Working Paper: Good Carry, Bad Carry (2019)
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: https://EconPapers.repec.org/RePEc:cup:jfinqa:v:55:y:2020:i:4:p:1063-1094_1

Access Statistics for this article

More articles in Journal of Financial and Quantitative Analysis from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().