TY  - JOUR
AU  - Gilmore,Stephen
AU  - Hayashi,Fumio
TI  - Emerging Market Currency Excess Returns
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14528
PY  - 2008
Y2  - December 2008
UR  - http://www.nber.org/papers/w14528
L1  - http://www.nber.org/papers/w14528.pdf
N1  - Author contact info:
Stephen Gilmore
Banque AIG
1 Curzon Street
London W1J 5RT
United Kingdom 
E-Mail: gilmore@aigfpc.com

Fumio Hayashi
Hitotsubashi University
Grad. School of International Corporate Strategy
2-1-2 Hitotsubashi, Chiyoda-ku
Tokyo 101-8439
JAPAN
Tel: 81-3-5841-5652
Fax: 1-801-469-0086
E-Mail: fumio.hayashi@gmail.com
AB  - We discuss the foreign currency forward premium puzzle in the context of 20 internationally tradable emerging market currencies.  We find that since the late 1990s the broad basket of emerging market currencies has provided significant equity-like excess returns against a number of major market currencies, but with low volatility.  We also find that the forward premium, or carry, is significant in explaining that excess return but that excess returns would still have existed even in the absence of positive carry.  Our calculation shows that transactions cost due to bid/offer spreads is substantially lower than commonly supposed in the academic literature.
ER  -