If You're So Smart: John Maynard Keynes and Currency Speculation in the Interwar Years

Forthcoming, Journal of Economic History

51 Pages Posted: 3 Dec 2015  

Olivier Accominotti

London School of Economics & Political Science (LSE); Centre for Economic Policy Research (CEPR)

David Chambers

University of Cambridge - Judge Business School, Department of Finance & Accounting

Date Written: December 1, 2015

Abstract

This paper explores the risks and returns to currency speculation during the 1920s and 1930s. We study the performance of two well-known technical trading strategies (carry and momentum) and compare them with that of a fundamentals-based trader: John Maynard Keynes. Technical strategies were highly profitable during the 1920s and even outperformed Keynes. In the 1930s however, both technical strategies and Keynes performed relatively poorly. Whilst our results reveal the existence of profitable opportunities for currency traders in the interwar years, they suggest that such profits were necessary compensation for enduring the substantial risks which all strategies entailed.

Keywords: carry, momentum, foreign exchange, currency markets, currency crises

JEL Classification: F31, G15, G14, N22, N24

Suggested Citation

Accominotti, Olivier and Chambers, David, If You're So Smart: John Maynard Keynes and Currency Speculation in the Interwar Years (December 1, 2015). Forthcoming, Journal of Economic History. Available at SSRN: https://ssrn.com/abstract=2698151

Olivier Accominotti

London School of Economics & Political Science (LSE) ( email )

Economic History Department
Houghton Street
London, WC2A 2AE
United Kingdom

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

David Chambers (Contact Author)

University of Cambridge - Judge Business School, Department of Finance & Accounting ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom
44 (0)1223 339700 (Phone)

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