How much Asymmetry is there in Bond Returns and Exchange Rates?

Lena Mareen Koerber, Daisuke Nagakura and Ippei Fujiwara
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Lena Mareen Koerber: London School of Economics
Authors registered in the RePEc Author Service: Lena Boneva

No 11-E-10, Bank of Japan Working Paper Series from Bank of Japan

Abstract: We measure asymmetries in the distribution of bond returns and exchange rates and test their statistical significance. Asymmetries are sizable when measured by the coefficient of skewness, a measure that is highly affected by outliers. In contrast, robustly measured asymmetries to outliers often disagree in sign or size, implying that much of the asymmetries measured by the coefficient of skewness can be attributed to extreme observations. Asymmetries in many government bonds returns are only statistically significant according to tests based on the coefficient of skewness. On the contrary, only tests based on robust measures indicate statistically significant asymmetries in the exchanges rates of Japanese Yen, a major funding currency for carry trades, as well as in New Zealand Dollar and Australian Dollar, major investing currencies for carry trades. This observation suggests that sources of asymmetry in carry trades and in government bond returns can be fundamentally different.

Date: 2011-09-09
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Citations: View citations in EconPapers (1)

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Working Paper: How much asymmetry is there in bond returns and exchange rates? (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:boj:bojwps:11-e-10

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