Artikel
Time-varying risk aversion and the profitability of carry trades: Evidence from the cross-quantilogram
This paper examines the predictive power of time-varying risk aversion over payoffs to the carry trade strategy via the cross-quantilogram methodology. Our analysis yields significant evidence of directional predictability from risk aversion to daily carry trade returns tracked by the Deutsche Bank G10 Currency Future Harvest Total Return Index. The predictive power of risk aversion is found to be stronger during periods of moderate to high risk aversion and largely concentrated on extreme fluctuations in carry trade returns. While large crashes in carry trade returns are associated with significant rises in investors' risk aversion, we also found that booms in carry trade returns can be predicted at high quantiles of risk aversion. The results highlight the predictive role of extreme investor sentiment in currency markets and regime specific patterns in carry trade returns that can be captured via quantile-based predictive models.
- Sprache
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Englisch
- Erschienen in
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Journal: Economies ; ISSN: 2227-7099 ; Volume: 8 ; Year: 2020 ; Issue: 1 ; Pages: 1-12 ; Basel: MDPI
- Klassifikation
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Wirtschaft
Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
Foreign Exchange
- Thema
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quantile
correlogram
dependence
predictability
- Ereignis
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Geistige Schöpfung
- (wer)
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Demirer, Rıza
Gupta, Rangan
Hassani, Hossein
Huang, Xu
- Ereignis
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Veröffentlichung
- (wer)
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MDPI
- (wo)
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Basel
- (wann)
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2020
- DOI
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doi:10.3390/economies8010018
- Handle
- Letzte Aktualisierung
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10.03.2025, 11:42 MEZ
Datenpartner
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Objekttyp
- Artikel
Beteiligte
- Demirer, Rıza
- Gupta, Rangan
- Hassani, Hossein
- Huang, Xu
- MDPI
Entstanden
- 2020