Carry trade returns and Portfolio Holdings

Carry trade returns and Portfolio Holdings

• Author
• Alex Ferreira
• Co-authors
• Miguel León-Ledesma , Giuliano de Queiroz Ferreira , Rory Mullen
• Abstract

• We find in aggregate portfolio holdings data that carry traders are outweighed by other investors in short-term debt markets. We interpret this finding as evidence of investor hetero- geneity. We study the joint determination of individual and aggregate carry trade positions and carry trade returns in a general equilibrium model with investor heterogeneity in risk aversion. We study the asset pricing implications of the model using standard asset pricing tests, and find empirical support for key asset pricing and portfolio predictions that the model makes.

• Keywords
• carry trade, portfolio holdings, risk aversion, heterogeneity, asset pricing
• Subject Area
• Asset pricing, investments, and Derivatives

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