| 主讲人 |
George Panayotov |
简介 |
We distinguish between "good" and "bad" carry trades constructed from G-10 currencies. The good trades exhibit higher Sharpe ratios and slightly negative or even positive skewness, in contrast to the bad trades that have both substantially lower Sharpe ratios and skewness. Surprisingly, good carry trades do not involve the most typical carry trade currencies like the Australian dollar and Japanese yen. The distinction between good and bad trades significantly alters our understanding of currency carry trade returns. It invalidates, for example, explanations invoking return skewness and crash risk, as the negative return skewness is induced by the typical carry currencies. We find strong predictability with previously identified carry return predictors for bad, but not good carry trade returns. In addition, a static carry component explains a much larger proportion of bad carry trade returns, than of good carry trade returns. Furthermore, good carry trade returns perform better than bad carry trade returns as a risk factor, explaining the returns of interest-rate sorted currency portfolios, and in turn are better explained with equity market risk factors. |
