Carry Trade and Momentum in Currency Markets
We examine the empirical properties of the payoffs to two popular currency speculation strategies: the carry trade and momentum. We review three possible explanations for the apparent profitability of these strategies. The first is that speculators are being compensated for bearing risk. The second is that these strategies are vulnerable to rare disasters or peso problems. The third is that there is price pressure in currency markets.
Burnside, C, Eichenbaum, M and Rebelo, S. 2011. Carry Trade and Momemtum in Currency Markets. Annu. Rev. Fin. Econ.: Submitted. Doi: 10.1146/annurev-financial-102710-144913 The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 2011. "Carry Trade and Momentum in Currency Markets," Annual Review of Financial Economics, Annual Reviews, vol. 3(1), pages 511-535, December. citation courtesy of