Swing Trading Signals


Since 2013

  • 100% Quantified, data-driven and Backtested
  • We always show our results!
  • Signals every day via our site or email
  • Cancel at any time!

A New Look at Currency Investing

Last Updated on 10 February, 2024 by Rejaul Karim

The research monograph “A New Look at Currency Investing” by Momtchil Pojarliev and Richard M. Levich offers a comprehensive examination of the rationale for investing in currency. The authors shed light on the myriad features of currency returns that render it an alluring asset class for institutional investors.

By utilizing style factors to model currency returns, this study presents a natural approach to dissecting returns into alpha and beta components. The research notably demonstrates that various established currency trading strategies, including variants of carry, trend-following, and value strategies, consistently yield returns that can be proxy-defined as style or risk factors, expounding their nature as beta returns.

Moreover, through the analysis of returns from actual currency hedge funds, the authors identify currency managers capable of producing genuine alpha.

Additionally, the research unveils that even a modest increment of currency exposure, particularly to alpha generators, can significantly enhance an institutional investor’s portfolio performance. This insightful investigation illuminates the intricacies of currency investing and its potential impact on institutional portfolios.

Abstract Of Paper

The authors of this book examine the rationale for investing in currency. They highlight several features of currency returns that make currency an attractive asset class for institutional investors. Using style factors to model currency returns provides a natural way to decompose returns into alpha and beta components. They find that several established currency trading strategies (variants of carry, trend-following, and value strategies) produce consistent returns that can be proxied as style or risk factors and have the nature of beta returns. Then, using two datasets of returns of actual currency hedge funds, they find that some currency managers produce true alpha. Finally, they find that adding to an institutional investor’s portfolio even a small amount of currency exposure — particularly to alpha generators — can make a meaningful positive impact on the portfolio’s performance.

Original paper – Download PDF

Here you can download the PDF and original paper of A New Look at Currency Investing.

(An option to download will come shortly)

Author

Momtchil Pojarliev
Fischer Francis Trees & Watts, Inc.

Richard M. Levich
New York University (NYU) – Department of Finance; National Bureau of Economic Research (NBER)

Conclusion

In conclusion, the research monograph “A New Look at Currency Investing” authored by Momtchil Pojarliev and Richard M. Levich provides a compelling exploration of the rationale for currency investing, underscoring its appeal as an asset class for institutional investors.

The study’s utilization of style factors to model currency returns offers a systematic approach to parsing returns into alpha and beta components, emphasizing the nature of established currency trading strategies as beta returns that consistently yield favorable results.

Furthermore, the examination of actual currency hedge fund returns unveils the existence of currency managers capable of generating genuine alpha. Notably, the research underscores the profound impact of even a marginal increase in currency exposure, particularly to alpha generators, on enhancing the performance of institutional portfolios.

This comprehensive analysis enriches our understanding of the intricacies of currency investing and its potential to positively influence the performance of institutional investment portfolios.

Related Reading:

Yield Curve Predictors of Foreign Exchange Returns

A Multi-Strategy Approach to Trading Foreign Exchange Futures

FAQ

Q1: What is the main focus of the research monograph “A New Look at Currency Investing” by Momtchil Pojarliev and Richard M. Levich?

A1: The main focus of the research monograph is to examine the rationale for investing in currency. The authors explore various features of currency returns that make it an attractive asset class for institutional investors.

Q2: How does the study approach the modeling of currency returns, and what insights does it provide?

A2: The study utilizes style factors to model currency returns, offering a natural approach to decomposing returns into alpha and beta components. The research demonstrates that established currency trading strategies, including variants of carry, trend-following, and value strategies, consistently yield returns that can be defined as style or risk factors, emphasizing their nature as beta returns.

Q3: What does the research reveal about currency trading strategies and their nature as beta returns?

A3: The research reveals that several established currency trading strategies, such as carry, trend-following, and value strategies, produce consistent returns that can be proxied as style or risk factors. These returns exhibit the nature of beta returns within the context of currency investing.

Check The Leading Resource On The Internet For Research And Academic Papers

Leave a Reply

{"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}

Monthly Trading Strategy Club

$42 Per Strategy

>

Login to Your Account



Signup Here
Lost Password