Measuring liquidity risk effects on carry trades across currencies and regimes

IF 2.9 3区经济学 Q2 BUSINESS, FINANCE Journal of Multinational Financial Management Pub Date : 2021-06-01 DOI:10.1016/j.mulfin.2021.100683

Samuel Abankwa , Lloyd P. Blenman

引用次数: 12

Abstract

We study the effects of FX liquidity risk on carry trade returns using a novel low-frequency market-wide liquidity measure. We show conclusively that the vast majority of variation in carry trade returns can be explained by two risk factors (liquidity risk and market risk). Our results are further corroborated when the mimicking liquidity risk factor is replaced with a non-tradable innovations risk factor. Safe-haven currencies (SHC) provide insurance against crash risk by having negative liquidity betas, across all time periods. SHCs provide the highest levels of protection during periods of extreme volatility. We find that liquidity risk is priced in the cross-section of carry trade returns, and estimate the liquidity risk premium in the FX market to be around 412 basis points per annum.

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衡量跨货币和制度套利交易的流动性风险影响

本文采用一种新颖的低频市场流动性度量来研究外汇流动性风险对套息交易收益的影响。我们得出结论，套利交易收益的绝大多数变化可以用两个风险因素(流动性风险和市场风险)来解释。将模拟流动性风险因素替换为非交易性创新风险因素时，我们的研究结果得到进一步证实。避险货币(SHC)在所有时期都具有负流动性贝塔值，为防范崩溃风险提供了保障。shc在极端波动期间提供最高水平的保护。我们发现流动性风险在套利交易收益的横截面上定价，并估计外汇市场的流动性风险溢价约为每年412个基点。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Journal of Multinational Financial Management BUSINESS, FINANCE-

CiteScore

7.30

自引率

4.80%

发文量

审稿时长

30 days

期刊介绍： International trade, financing and investments have grown at an extremely rapid pace in recent years, and the operations of corporations have become increasingly multinationalized. Corporate executives buying and selling goods and services, and making financing and investment decisions across national boundaries, have developed policies and procedures for managing cash flows denominated in foreign currencies. These policies and procedures, and the related managerial actions of executives, change as new relevant information becomes available. The purpose of the Journal of Multinational Financial Management is to publish rigorous, original articles dealing with the management of the multinational enterprise. Theoretical, conceptual, and empirical papers providing meaningful insights into the subject areas will be considered. The following topic areas, although not exhaustive, are representative of the coverage in this Journal. • Foreign exchange risk management • International capital budgeting • Forecasting exchange rates • Foreign direct investment • Hedging strategies • Cost of capital • Managing transaction exposure • Political risk assessment • International working capital management • International financial planning • International tax management • International diversification • Transfer pricing strategies • International liability management • International mergers.

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