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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/26336
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| Title: | Do Professional Currency Managers Beat the Benchmark? |
| Authors: | Pojarliev, Momtchil
M. Levich, Richard |
| Issue Date: | 19-Dec-2007 |
| Series/Report no.: | FIN-07-023 |
| Abstract: | We investigate an index of returns on professionally managed currency
funds and a subset of returns from 34 individual currency fund managers.
Over the period 1990-2006, excess returns earned by currency fund
managers have averaged 25 basis points per month. We examine the
relationship of these returns to four factors representing returns based
on carry trading, trend-following, value trading and currency
volatility. These four factors explain a substantial portion of the
variability in index returns in the entire period and in sub-periods. We
perform similar regressions for the 34 individual funds, and find many
funds where returns are significantly related to these four factors. Our
approach impacts the definition of alpha returns from currency
speculation, modifying it from the excess return earned by the fund, to
only that portion of the excess returns not explained by the four
factors. While the impact on measured alpha is substantial, we find that
some currency fund managers continued to generate alpha returns in the
most recent sample period. |
| URI: | http://hdl.handle.net/2451/26336 |
| Appears in Collections: | Finance Working Papers
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