Yen carry trades and stock returns in target currency countries

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalNot applicablepeer-review

6 Scopus Citations
View graph of relations

Author(s)

Related Research Unit(s)

Detail(s)

Original languageEnglish
Pages (from-to)174-183
Journal / PublicationJapan and the World Economy
Volume24
Issue number3
Publication statusPublished - Aug 2012

Abstract

The proliferation of carry trade - a strategy of simultaneously shorting a low-yielding currency and longing a high-yielding currency raises the concern on its impact on global asset prices. In this exercise, we examine the implications of yen carry trade for stock markets in a few selected target currency countries. Three alternative proxies for carry trade activity - a currency-specific profit measure, a currency-specific futures position variable, and the Deutsche Bank G10 Currency Futures Harvest Index - are used. It is found that the three measures of carry trade display various degrees of influences on stock returns in Australia, Canada, Britain, Mexico, and New Zealand. The empirical carry trade effect is robust to the inclusion of three control variables; namely the US stock return, the VIX Index that represents market volatility, and commodity prices. Further, the estimation results suggest that the three measures of carry trade share some common information about stock returns in target currency countries. © 2012 Elsevier B.V..

Research Area(s)

  • Carry Trade Index, Carry trade profit, Equity return, Futures position, VIX

Citation Format(s)

Yen carry trades and stock returns in target currency countries. / Cheung, Yan-Leung; Cheung, Yin-Wong; He, Angela W.W.

In: Japan and the World Economy, Vol. 24, No. 3, 08.2012, p. 174-183.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalNot applicablepeer-review