Abstract

http://ssrn.com/abstract=2311574
 
 

Citations (4)



 


 



Carry


Ralph S. J. Koijen


London Business School - Department of Finance; Centre for Economic Policy Research (CEPR)

Tobias J. Moskowitz


University of Chicago - Booth School of Business; AQR Capital; National Bureau of Economic Research (NBER)

Lasse Heje Pedersen


Copenhagen Business School; New York University (NYU); AQR Capital Management, LLC; Centre for Economic Policy Research (CEPR)

Evert B. Vrugt


VU University Amsterdam, PGO-IM

August 2013

NBER Working Paper No. w19325

Abstract:     
A security's expected return can be decomposed into its "carry" and its expected price appreciation, where carry can be measured in advance without an asset pricing model. We find that carry predicts returns both in the cross section and time series for a variety of different asset classes that include global equities, global bonds, currencies, commodities, US Treasuries, credit, and equity index options. This predictability underlies the strong returns to "carry trades" that go long high-carry and short low-carry securities, applied almost exclusively to currencies, but shown here to be a robust feature of many assets. We decompose carry returns into static and dynamic components and analyze the economic exposures. Despite unconditionally low correlations across asset classes, we find times when carry strategies across all asset classes do poorly, and show that these episodes coincide with global recessions.

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Number of Pages in PDF File: 65


Date posted: August 17, 2013  

Suggested Citation

Koijen, Ralph S. J. and Moskowitz, Tobias J. and Pedersen, Lasse Heje and Vrugt, Evert B., Carry (August 2013). NBER Working Paper No. w19325. Available at SSRN: http://ssrn.com/abstract=2311574

Contact Information

Ralph S. J. Koijen (Contact Author)
London Business School - Department of Finance ( email )
Sussex Place
Regent's Park
London NW1 4SA
United Kingdom
Centre for Economic Policy Research (CEPR) ( email )
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Tobias J. Moskowitz
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-2757 (Phone)
773-702-0458 (Fax)

Chicago Booth School of Business Logo

AQR Capital ( email )
Greenwich, CT
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Lasse Heje Pedersen
Copenhagen Business School ( email )
Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark
New York University (NYU) ( email )
Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
AQR Capital Management, LLC ( email )
Greenwich, CT
United States
Centre for Economic Policy Research (CEPR) ( email )
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Evert B. Vrugt
VU University Amsterdam, PGO-IM ( email )
De Boelelaan 1105
Amsterdam, ND North Holland 1081 HV
Netherlands
Feedback to SSRN


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Citations:  4

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