Currency Investing Throughout Recent Centuries

83 Pages Posted: 28 Jan 2024

See all articles by Joseph Chen

Joseph Chen

University of California, Davis - Graduate School of Management

Date Written: May 30, 2024

Abstract

The literature on currency investing generally bases its analysis on the most recent period since 1983 and uses short-term bills as the investment vehicle. I analyze the risk and return characteristics of currency investing over an extended period using data that reaches back as far as 1788, and I extend the analysis to long-term bonds. Excess returns on currencies have been predictable throughout history across various periods and robust to using long-term bonds. The risk premia estimates indicate nominal exchange rates are not stationary and are informative about the time-variations in the pricing kernel in a reduced-form pricing model.

Keywords: JEL classification: F31, G12, G15, N2 carry trade, currencies, foreign exchange rates, bond returns, predictability, forward premium puzzle, uncovered interest rate parity

JEL Classification: F31, G12, G15, N2

Suggested Citation

Chen, Joseph S., Currency Investing Throughout Recent Centuries (May 30, 2024). Available at SSRN: https://ssrn.com/abstract=4692257 or http://dx.doi.org/10.2139/ssrn.4692257

Joseph S. Chen (Contact Author)

University of California, Davis - Graduate School of Management ( email )

One Shields Avenue
Davis, CA 95616
United States
(530) 752-7155 (Phone)
(530) 752-2924 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
332
Abstract Views
699
Rank
171,401
PlumX Metrics