Abstract

http://ssrn.com/abstract=2118239
 
 

References (48)



 
 

Citations (2)



 


 



Commodity Trade and the Carry Trade: A Tale of Two Countries


Robert C. Ready


University of Rochester - Simon Business School

Nikolai L. Roussanov


University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER)

Colin Ward


University of Minnesota - Twin Cities - Department of Business Finance

August 20, 2013


Abstract:     
Persistent differences in interest rates across countries account for much of the profitability of currency carry trade strategies. "Commodity currencies'' tend to have high interest rates while low interest rate currencies belong to exporters of finished goods.This pattern arises in a complete-markets model with trade specialization and limited shipping capacity, whereby commodity-producing countries are insulated from global productivity shocks, which are absorbed by the final goods producers. Empirically, a commodity-based strategy explains a substantial portion of the carry-trade risk premia, and all of their pro-cyclical predictability with commodity prices and shipping costs, as predicted by the model.

Number of Pages in PDF File: 74

Keywords: currency risk premia, international trade, commodity markets, return predictability, Baltic Dry Index

JEL Classification: E44, F31, G15

working papers series


Download This Paper

Date posted: July 28, 2012 ; Last revised: August 24, 2013

Suggested Citation

Ready, Robert C. and Roussanov, Nikolai L. and Ward, Colin, Commodity Trade and the Carry Trade: A Tale of Two Countries (August 20, 2013). Available at SSRN: http://ssrn.com/abstract=2118239 or http://dx.doi.org/10.2139/ssrn.2118239

Contact Information

Robert C. Ready
University of Rochester - Simon Business School ( email )
Rochester, NY 14627
United States
Nikolai L. Roussanov (Contact Author)
University of Pennsylvania - The Wharton School ( email )
3641 Locust Walk
Philadelphia, PA 19104-6365
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Colin Ward
University of Minnesota - Twin Cities - Department of Business Finance ( email )
Carlson School of Management
321 19th Avenue South
Minneapolis, MN 55455
United States
Feedback to SSRN


Paper statistics
Abstract Views: 440
Downloads: 131
Download Rank: 374,404
References:  48
Citations:  2

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo7 in 0.344 seconds