Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/329622 
Year of Publication: 
2022
Citation: 
[Journal:] ACRN Journal of Finance and Risk Perspectives (JOFRP) [ISSN:] 2305-7394 [Volume:] 11 [Year:] 2022 [Pages:] 120-140
Publisher: 
ACRN Oxford Research Network, Oxford
Abstract: 
Three main currency strategies have been established in the literature: carry, value, and momentum. We investigate momentum using data on 27 currencies (10 developed countries and 17 emerging markets). We find that momentum returns are driven by emerging market currencies, while the currencies of developed countries have no impact. An emerging market- specific dollar risk factor can partly explain these momentum returns. We carry out permutation tests and find support for our hypothesis that momentum returns are driven by emerging markets. However, we show that transaction costs reduce momentum returns considerably. We also show that the returns are time-varying and have been unattractive recently. The implications of this study for financial practitioners are to focus on emerging market currencies and optimise transaction costs when executing momentum strategies.
Subjects: 
Currency
Momentum
Exchange Rates
Emerging Markets
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-sa Logo
Document Type: 
Article

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