Economics at your fingertips  

The Time-Varying Risk Price of Currency Carry Trades

Joseph Byrne (), Boulis Maher Ibrahim and Ryuta Sakemoto

MPRA Paper from University Library of Munich, Germany

Abstract: Recent studies show that carry trade returns are predictable and this predictability reflects changes in expected returns. Changes in expected returns may be related to time variation in betas and risk prices. We investigate this issue in carry trades and find clear evidence of time-varying risk prices for the carry factor (HMLFX). The results further indicate that time-varying risk prices are more important than time-varying betas for the carry trade asset pricing model. This suggests that investors overreact to changes in economic states.

Keywords: Currency Carry Trades; Exchange Rate; Risk Price; Time-varying Betas; Factor Model; Nonparametric Model; FX market. (search for similar items in EconPapers)
JEL-codes: C58 E44 F31 G12 G15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2017-08-14
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) original version (application/pdf)

Related works:
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:

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().

Page updated 2019-05-02
Handle: RePEc:pra:mprapa:80788