一、主题：Currency Carry, Momentum, and US Monetary Policy Uncertainty
二、主讲人：曾鸣，新加坡管理大学经济学博士。主要研究领域为实证资产定价、金融经济学、国际金融和应用计量经济学。学术成果在国内外顶尖学术会议上宣讲，包括FMA Annual meeting, EEA-ESEM, Econometric Society Asian Meeting, Econometric Society China Meeting, Wolfe Research Global Quantitative and Macro Investment Conference, Conference on Frontiers of Factor Investing, Australasian Finance and Banking Conference, Annual Conference of International Association for Applied Econometrics.
Abstract: Currency carry and momentum are among the most popular investment strategies in the foreign exchange market. The carry (momentum) strategy buys currencies with high interest rates (recent returns) and sells currencies with low interest rates (recent returns). The strategies realize similar or even higher Sharpe ratios compared with that of the US aggregate stock market over the past 30 years, yet little is known for their common risk sources. This paper finds that their high returns are compensation for the risk of US monetary policy uncertainty (MPU), with risk exposures explaining 96% of their cross-sectional return variations. The profitability of two strategies also weakens substantially when the uncertainty over US monetary policy is unexpectedly high. Asset pricing tests show that the role of US MPU is not driven by exposures to commonly used risk factors such as the global foreign exchange volatility risk. The unified explanatory power is consistent with an intermediary-based exchange rate model. High carry and momentum currencies are more attractive to hold against US dollar (USD) by the intermediary, due to their high interest rate and low future supply against USD. Positive US MPU shocks tighten the intermediary’s financial constraints and trigger the position unwinding by the intermediary. As a result, high carry and momentum currencies realize low returns and command high risk premia as they are bad hedges to the US MPU shocks.