Economic momentum and currency returns

• 成果类型: Article
• 署名作者: Dahlquist, Magnus; Hasseltoft, Henrik
• 署名单位: Stockholm School of Economics; Centre for Economic Policy Research - UK
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2019.09.002
• 发表日期: 2020
• 页码: 152-167
• 关键词: Carry trade; foreign exchange rates; predictability; Trend following; TRENDS

摘要

Past trends in fundamentals linked to economic activity and inflation predict currency returns. We find that a trading strategy that goes long currencies with strong economic momentum and short currencies with weak economic momentum exhibits an annualized Sharpe ratio of 0.70 and yields a significant alpha when controlling for standard carry, momentum, and value strategies. The economic momentum strategy subsumes the alpha of carry trades, suggesting that differences in past economic trends capture cross-country differences in carry. (C) 2019 Elsevier B.V. All rights reserved.