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Article
Is Carry-trade a Viable Alternative Asset Class?
Journal of International Financial Markets, Institutions and Money
(2013)
Abstract
The currency carry-trade, which consists of selling low-yielding currencies and investing in high-yielding currencies, has the potential to be a new alternative asset class in the asset allocation decision. Using the Sharpe ratio and other performance measures, carry-trade displays noticeable characteristics (particularly low volatility) that improve portfolio performance when added to a portfolio and when used for replacing other alternative asset classes. Results also indicate that carry-trade enhanced portfolio performance during the recent financial crisis. Individual investors can readily use carry-trade in asset allocation with an exchange-traded fund.
Publication Date
April 1, 2013
DOI
10.1016/j.intfin.2012.12.004
Citation Information
Sougata Das, Palani Rajan Kadapakkam and Yiuman Tse. "Is Carry-trade a Viable Alternative Asset Class?" Journal of International Financial Markets, Institutions and Money Vol. 24 Iss. 1 (2013) p. 247 - 257 Available at: http://works.bepress.com/yiuman-tse/24/