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Carry trades and the performance of currency hedge funds

Nucera, F and Valente, G (2013) 'Carry trades and the performance of currency hedge funds.' Journal of International Money and Finance, 33. pp. 407-425. ISSN 0261-5606

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Abstract

We investigate the performance and risk of currency hedge funds using a large and unique consolidated currency hedge fund dataset. We find that a substantial number of hedge funds generate returns that exceed foreign exchange risk premia obtained through carry trades. The best alpha-generating funds exhibit a performance that persists over a one-year horizon. This performance persistence is mostly due to compensation for currency risk-taking as there is no strong evidence of remuneration for active management. The results are robust to biases affecting hedge fund returns, alternative carry trade benchmarks and different methodologies used to correct for sample variability.

Item Type: Article
Uncontrolled Keywords: Hedge funds; Foreign exchange; Asset allocation; Funds performance evaluation
Subjects: H Social Sciences > HG Finance
Divisions: Faculty of Social Sciences
Faculty of Social Sciences > Essex Business School
SWORD Depositor: Elements
Depositing User: Elements
Date Deposited: 11 Nov 2014 13:45
Last Modified: 06 Jan 2022 13:37
URI: http://repository.essex.ac.uk/id/eprint/11258

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