Carry Trade and Momentum in Currency Markets

Craig Burnside, Martin Eichenbaum and Sergio Rebelo ()

No 16942, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: F31 (search for similar items in EconPapers)
Date: 2011-04
New Economics Papers: this item is included in nep-ifn, nep-int and nep-opm
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Citations: View citations in EconPapers (125)

Published as Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 2011. "Carry Trade and Momentum in Currency Markets," Annual Review of Financial Economics, Annual Reviews, vol. 3(1), pages 511-535, December.

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