The driving forces behind the carry trade and momentum strategy in three-factors foreign exchange returns model
| Autor: | Huang, Ping Hsiang, 黃品翔 |
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| Druh dokumentu: | 學位論文 ; thesis |
| Popis: | 105 This paper is based on the model of three-factors foreign exchange returns. So we test whether three-factors FX model which adds the factor of momentum can have stronger ability to explain currency excess return than two-factors FX model in the sampling period of February 1985 to October 2016. And the 37 kinds of currency are sorted by double sort method and become 9 portfolios. Finally, no matter coefficient of determination or residual error, three-factors FX model performs well. Further, we use stepwise LS regression (independent variable should have statistical significance in 90% confidence interval) to find which factor we choose can cause carry and momentum strategy profit in three-factors FX model. Next, using Fama-MacBeth two-step regression to estimate the asset pricing ability. The results represent that all contribution factors which get from stepwise LS method are significant. Carry trade strategy and △EVOL are negative correlation, because volatility of stock index will influence volatility of FX. And there have the positive correlation between momentum trade strategy and two factors(△EVOL and △LTS). Just because the profit from momentum strategy comes from the incomplete reaction of market information and △EVOL give more motive force. Besides, there have different investment reactions in diverse business cycle. Investors are over confident and optimistic during the period of recession and have disposition effect during the period of boom. |
| Databáze: | Networked Digital Library of Theses & Dissertations |
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