Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/58381
Authors: 
Jorda, Oscar
Year of Publication: 
2010
Series/Report no.: 
Working Papers, University of California, Department of Economics 10,18
Abstract: 
It does not take much sophistication for a speculator to generate risk-adjusted positive returns with the carry trade. A number of obvious improvements (such as optimally designed portfolios, strategies that permit the speculator to remain in a cash position when expected returns are small or uncertain, and others not considered here) would only improve the speculatorÂ’s returns further. That this is so poses a challenge to conventional notions of market efficiency and long-standing puzzles in international finance. The carry trade is a risky investment but its positive returns are hard to justify on the basis of the investorÂ’s tolerance for exposure or how returns correlate with a wide range of alternative risk factors.
Document Type: 
Working Paper

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