The decision to manage currencies in international equity portfolios is a complex one, and is intrinsically related to the final objective of the investor, whether it is risk reduction, or improvement in risk adjusted returns. In the absence of a confident view on the direction of foreign...

The currency carry trade (CCT) strategy - borrowing in low-interest-rate currencies and investing in high-interest-rate currencies - has been found to generate excess returns that cannot be explained by common risk factors. We argue that companies implicitly execute carry trades, when they have...

We find important differences in dollar-based and dollar-neutral G10 carry trades. Dollar-neutral trades have positive average returns, are highly negatively skewed, are correlated with risk factors, and exhibit considerable downside risk. In contrast, a diversified dollar-carry portfolio has a...