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Working Paper
Can risk explain the profitability of technical trading in currency markets?
Academic studies show that technical trading rules would have earned substantial excess returns over long periods in foreign exchange markets. However, the approach to risk adjustment has typically been rather cursory. We examine the ability of a wide range of models: CAPM, quadratic CAPM, downside risk CAPM, C-CAPM, Carhart?s 4-factor model, an extended C-CAPM with durable consumption, Lustig-Verdelhan (LV) factors, volatility, skewness and liquidity to explain these technical trading returns. No model plausibly accounts for a substantial amount of technical profitability in the foreign ...
Working Paper
Discount Shock, Price-Rent Dynamics, and the Business Cycle
The price-rent ratio in commercial real estate is highly volatile, and its variation comoves with the business cycle. To account for these two facts, we develop a dynamic general equilibrium model that explicitly introduces a rental market and incorporates the liquidity constraint on an individual firm's production as a key ingredient. Our estimation identifies the discount shock as the most important factor in driving price-rent dynamics and linking the dynamics in the real estate market to those in the real economy. We illustrate the importance of the liquidity premium and endogenous total ...
Working Paper
Can risk explain the profitability of technical trading in currency markets?
Academic studies show that technical trading rules would have earned substantial excess returns over long periods in foreign exchange markets. However, the approach to risk adjustment has typically been rather cursory. We examine the ability of a wide range of models: CAPM, quadratic CAPM, downside risk CAPM, Carhart’s 4-factor model, the C-CAPM, an extended C-CAPM with durable consumption, Lustig-Verdelhan (LV) carry-trade factor model, and models including macroeconomic factors, and foreign exchange volatility, skewness and liquidity, to explain these technical trading returns. No model ...