Carry Trade: The Gains of Diversification

dc.contributor.author	Burnside, Craig	en_US
dc.contributor.author	Eichenbaum, Martin	en_US
dc.contributor.author	Rebelo, Sergio	en_US
dc.date.accessioned	2010-06-28T18:58:56Z
dc.date.available	2010-06-28T18:58:56Z
dc.date.issued	2008-04-01	en_US
dc.identifier.uri	http://hdl.handle.net/10161/2587
dc.description.abstract	Market participants routinely take advantage of the failure of uncovered interest rate parity to speculate in currency markets. Perhaps the most widely used currency speculation strategy is the carry trade. In this article we take the perspective of an individual currency trader and document the gains to diversifying the carry trade across different currencies. We show that these gains are large. Diversification boosts the typical Sharpe ratio by over 50%.	en_US
dc.format.extent	129317 bytes
dc.format.mimetype	application/pdf
dc.language.iso	en_US
dc.publisher	Journal of the European Economic Association	en_US
dc.subject	interest rate parity	en_US
dc.subject	sharpe ratio	en_US
dc.title	Carry Trade: The Gains of Diversification	en_US
dc.type	Journal Article	en_US
dc.department	Economics