Is carry-trade a viable alternative asset class?

Sougata Das, Palani-Rajan Kadapakkam and Yiuman Tse

Journal of International Financial Markets, Institutions and Money, 2013, vol. 24, issue C, 247-257

Abstract: The currency carry-trade, which consists of selling low-yielding currencies and investing in high-yielding currencies, has the potential to be a new alternative asset class in the asset allocation decision. Using the Sharpe ratio and other performance measures, carry-trade displays noticeable characteristics (particularly low volatility) that improve portfolio performance when added to a portfolio and when used for replacing other alternative asset classes. Results also indicate that carry-trade enhanced portfolio performance during the recent financial crisis. Individual investors can readily use carry-trade in asset allocation with an exchange-traded fund.

Keywords: Carry-trade; Alternative asset class; Asset allocation (search for similar items in EconPapers)
JEL-codes: G10 G11 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:24:y:2013:i:c:p:247-257

DOI: 10.1016/j.intfin.2012.12.004

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