Carry Trade and Momentum in Currency Markets

Martin Eichenbaum, Sergio Rebelo () and Craig Burnside

No 8343, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We examine the empirical properties of the payoffs to two popular currency speculation strategies: the carry trade and momentum. We review three possible explanations for the apparent profitability of these strategies. The first is that speculators are being compensated for bearing risk. The second is that these strategies are vulnerable to rare disasters or peso problems. The third is that there is price pressure in currency markets.

Keywords: Exchange rates; Forward rates; Uncovered interest parity (search for similar items in EconPapers)
JEL-codes: F31 (search for similar items in EconPapers)
Date: 2011-04
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Citations: View citations in EconPapers (122)

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Related works:
Journal Article: Carry Trade and Momentum in Currency Markets (2011)
Working Paper: Carry Trade and Momentum in Currency Markets (2011)
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