The Profitability of Carry Trade Relative to a Forecasting-Based Strategy - La profittabilità del carry trade comparata ad una strategia basata sulle previsioni

Imad A. Moosa () and Pashaar Halteh
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Imad A. Moosa: RMIT University School of Economics, Finance and Marketing, Postal: Building 108 Level 12, 239 Bourke Street Melbourne 3000 Victoria, Australia ,, http://www.rmit.edu.au
Pashaar Halteh: La Trobe University, Postal: 215 Franklin Street, Melbourne Victoria 3000 - Australia, http://www.latrobe.edu.au/

Economia Internazionale / International Economics, 2012, vol. 65, issue 4, 605-621

Abstract: Six currency combinations are used to study the comparative profitability of carry trade and a forecasting-based strategy. The results show that the forecasting-based strategy outperforms straight carry trade in terms of return and risk-adjusted return. The implication of these results is that forecasting may indeed be useful for currency trading and that carry trade is not as lucrative as it is portrayed to be. Another implication of the results is that the Meese-Rogoff (1983) finding that macroeconomic models of exchange rates cannot outperform the random walk may only be due to the fact that measures of forecasting accuracy, such as the root mean square error, do not take into account the ability of the model to predict the direction of change in the exchange rate. - Vengono utilizzate sei combinazioni di valute per studiare la profittabilità comparata del carry trade e di una strategia basata sulle previsioni. I risultati dimostrano che la strategia basata sulle previsioni supera il carry trade ‘puro’ in termini di profitto e profitto aggiustato per il rischio. Ciò implica che tale sistema può realmente essere utile per il trading di valute e che il carry trade non è così remunerativo come si ritiene. Un’altra implicazione è che i risultati di Meese e Rogoff (1983) circa il fatto che i modelli macroeconomici dei tassi di cambio non sono superiori ai modelli random walk possono essere dovuti soltanto al fatto che le misure di accuratezza delle previsioni, come l’errore quadratico medio, non tengono conto dell’abilità del modello di prevedere la direzione della variazione del tasso di cambio.

Keywords: Carry Trade; Uncovered Interest Parity; Exchange Rate Forecasting; Random Walk (search for similar items in EconPapers)
JEL-codes: G15 (search for similar items in EconPapers)
Date: 2012
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