Currency regimes and the carry trade

Olivier Accominotti, Jason Cen, David Chambers and Ian Marsh ()

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This study exploits a new long-run data set of daily bid and offered exchange rates in spot and forward markets from 1919 to the present to analyze carry returns in fixed and floating currency regimes. We first find that outsized carry returns occur exclusively in the floating regime, being zero in the fixed regime. Second, we show that fixed-to-floating regime shifts are associated with negative returns to a carry strategy implemented only on floating currencies, robust to the inclusion of volatility risks. These shifts are typically characterized by global flight-to-safety events that represent bad times for carry traders.

JEL-codes: F3 G3 L81 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2019-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Published in Journal of Financial and Quantitative Analysis, October, 2019, 54(5), pp. 2233 - 2260. ISSN: 0022-1090

Downloads: (external link)
http://eprints.lse.ac.uk/100239/ Open access version. (application/pdf)

Related works:
Journal Article: Currency Regimes and the Carry Trade (2019)
Working Paper: Currency Regimes and the Carry Trade (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:ehl:lserod:100239

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().