Currency momentum strategies uncovered: BIS paper
Authors Lukas Menkhoff, Lucio Sarno, Maik Schmeling and Andreas Schrimpf provide a broad empirical investigation of momentum strategies in the foreign exchange market in a new Bank for International Settlements working paper.
The researchers find a significant cross-sectional spread in excess returns of up to 10% a year between past winner and loser currencies. "This spread in excess returns is not explained by traditional risk factors, it is partially explained by transaction costs and shows
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