Abstract

https://ssrn.com/abstract=2632697
 
 

Citations (4)



 


 



Carry


Ralph S. J. Koijen


New York University (NYU) - Department of Finance; Centre for Economic Policy Research (CEPR)

Tobias J. Moskowitz


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

Lasse Heje Pedersen


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

Evert B. Vrugt


VU University Amsterdam, PGO-IM

November 1, 2016

Chicago Booth Research Paper No. 15-20

Abstract:     
We apply the concept of carry, which has been studied almost exclusively in currency markets, to any asset. A security’s expected return is decomposed into its “carry” – an ex-ante and model-free characteristic – and its expected price appreciation. Carry predicts returns cross-sectionally and in time series for a host of di erent asset classes, including global equities, global bonds, commodities, US Treasuries, credit, and options. Carry is not explained by known predictors of returns from these asset classes, and captures many of these predictors, providing a unifying framework for return predictability. We reject a generalized version of Uncovered Interest Parity and the Expectations Hypothesis in favor of models with varying risk premia, where carry strategies are commonly exposed to global recession, liquidity, and volatility risks, though none fully explain carry’s premium.

Number of Pages in PDF File: 67

Keywords: Carry Trade, Predictability, Stocks, Bonds, Currencies, Commodities, Corporate Bonds, Options, Global Recessions, Liquidity Risk, Volatility Risk


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Date posted: July 19, 2015 ; Last revised: November 1, 2016

Suggested Citation

Koijen, Ralph S. J. and Moskowitz, Tobias J. and Pedersen, Lasse Heje and Vrugt, Evert B., Carry (November 1, 2016). Chicago Booth Research Paper No. 15-20. Available at SSRN: https://ssrn.com/abstract=2632697 or http://dx.doi.org/10.2139/ssrn.2632697

Contact Information

Ralph S. J. Koijen
New York University (NYU) - Department of Finance ( email )
Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
HOME PAGE: http://www.koijen.net
Centre for Economic Policy Research (CEPR) ( email )
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Tobias J. Moskowitz (Contact Author)
AQR Capital ( email )
Greenwich, CT
United States

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

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Lasse Heje Pedersen
AQR Capital Management, LLC ( email )
Greenwich, CT
United States

Copenhagen Business School - Department of Finance ( email )
Solbjerg Plads 3
Frederiksberg, DK-2000
Denmark
New York University (NYU) ( email )
Stern School of Business
44 West 4th Street
New York, NY 10012-1126
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
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