In this paper, we study the effectiveness of carry trade strategies during and after the financial crisis using a flexible approach to modeling currency returns. We decompose the currency returns into multiplicative sign and absolute return components, which exhibit much greater predictability...

In this paper, we study the effectiveness of carry trade strategies during and after the financial crisis using a flexible approach to modeling currency returns. We decompose the currency returns into multiplicative sign and absolute return components, which exhibit much greater predictability...

While the predictability of excess stock returns is statistically small, their sign and volatility exhibit a substantially larger degree of dependence over time. We capitalize on this observation and consider prediction of excess stock returns by decomposing the equity premium into a product of...