A Sharpe-ratio-based measure for currencies
- Javier Prado-Dominguez
- Carlos Fernández-Herráiz
ISSN: 2254-7088
Año de publicación: 2015
Volumen: 4
Número: 1
Páginas: 67-75
Tipo: Artículo
Otras publicaciones en: European Journal of Government and Economics
Objetivos de desarrollo sostenible
Resumen
The Sharpe Ratio offers an excellent summary of the excess return required per unit of risk invested. This work presents an adaptation of the ex-ante Sharpe Ratio for currencies where we consider a random walk approach for the currency behavior and implied volatility as a proxy for market expectations of future realized volatility. The outcome of the proposed measure seems to gauge some information on the expected required return attached to the “peso problem”.
Referencias bibliográficas
- Clarida, Richard, Davis, Josh, Pedersen, Niels. (2009) ‘Currency Carry Trade Regimes: Beyond the Fama Regression’, NBER Working Paper No. 15523.
- Fama, Eugene F. (1984) ‘Forward and Spot Exchange Rates’, Journal of Monetary Economics 14(3): 319-338.
- Goetzmann, William, Ingersoll, Jonathan, Spiegel, Matthew I., Welch, Ivo. (2002) ‘Sharpening Sharpe Ratios’, NBER Working Paper No. 9116.
- Ilmanen, Antti. (2014) Expected Returns. West Sussex: John Wiley & Sons.
- Jordà, Òscar, Taylor, Alan M. (2009) ‘The Carry Trade and Fundamentals: Nothing to Fear but FEER Itself’, NBER Working Paper No. 15518.
- Keynes, John M. (1924) A Tract on Monetary Reform. London: Macmillan and co.
- Meese, Richard, Rogoff, Kenneth. (1983) ‘Empirical Exchange Rate Models of the Seventies. Do They Fit out of Sample?’, The Journal of International Economics 14:3-24.
- Menkhoff, Lukas, Sarno, Lucio, Schmeling, Maik, Schrimpf, Andreas. (2014) ‘Currency Value’, Kiel institute for the World Economy, University of Kiel.
- Poon, Ser-Huang, Granger, Clive W.J. (2003) ‘Forecasting Volatility in Financial Markets: A Review’, Journal of Economic Literature 41(2):478-539.
- Rossi, Barbara. (2013) ‘Exchange Rate Predictability’, CEPR Discussion Paper No. DP9575.
- Sarno, Lucio, Taylor, Mark P. (2003) The Economics of Exchange Rates. Cambridge: Cambridge University Press.
- Sharpe, William F. (1966) ‘Mutual Fund Performance’, Journal of Business 39(1):119-138.
- Sharpe, William F. (1994) ‘The Sharpe Ratio’, The Journal of Portfolio Management 21(1):49-58.
- Sill, Keith. (2000) ‘Understanding asset values: stock prices, exchange rates, and the “Peso Problem”’, Business Review September/October (2000):3-13.