THE CARRY TRADE ON THE EURO AND THE EUROPEAN STOCK MARKET

  • Fabio PARLAPIANO

Abstract

We analyze the influence of carry trades involving the Euro on the Eurozone stock market, modeling
returns as dependent on macroeconomic risk factors and speculative positions. The latter are measured by the
net open futures positions recorded on the CME. While correlated with the standard carry-to-risk and forward
discount proxies, net open positions have the considerable advantage of being directly observable. The results
show that long future positions on the Euro rise contemporaneously with the positive returns in the stock market,
supporting the hypothesis that speculative capital flows may inflate or stress the market price of financial assets.
Published
2014-08-15
How to Cite
PARLAPIANO , Fabio . THE CARRY TRADE ON THE EURO AND THE EUROPEAN STOCK MARKET. Journal of Advanced Studies in Finance, [S.l.], v. 5, n. 1, p. 103-114, aug. 2014. ISSN 2068-8393. Available at: <https://journals.aserspublishing.eu/jasf/article/view/99>. Date accessed: 16 aug. 2022.
Section
Journal of Advanced Studies in Finance