Title: The asymmetry in carry trade and the U.S. dollar
Authors: Chih-Chiang Wu - Yuzn Ze University (Taiwan)
Chang-Che Wu - Yuan Ze University (Taiwan) [presenting]
Abstract: The aim is to investigate the potential asymmetric dependence between the carry trade and U.S. dollar returns. Empirical results demonstrate that the U.S. dollar becomes a safe haven and provides protection for carry trade investors to avoid the crash risk during the 2007-2008 global financial crisis and the 2010-2011 Eurozone sovereign debt crisis. The asymmetric dependence is not only statistically significant, but this information also helps investors to generate extra 14-2,166 annualized basis points from the perspective of an asset-allocation decision. Our findings provide important financial implications for currency investors in asset allocation and risk management.