Some Motivating Facts Nelson Mark University of Notre Dame and NBER - PowerPoint PPT Presentation

Some Motivating Facts Nelson Mark University of Notre Dame and NBER Asset Pricing Course (Mark) Some Motivating Facts January 16, 2018 1 / 10

Equity and T-Bill Cumulated Returns (Mark) Some Motivating Facts January 16, 2018 2 / 10

Equity and T-Bill Cumulated Returns in logs (Mark) Some Motivating Facts January 16, 2018 3 / 10

Equity and T-Bill Annual Returns (Mark) Some Motivating Facts January 16, 2018 4 / 10

Equity, T-Bill Annual Returns, GDP, Consumption Growth (Mark) Some Motivating Facts January 16, 2018 5 / 10

GDP, Consumption Growth (Mark) Some Motivating Facts January 16, 2018 6 / 10

Connection to Stock Returns (Mark) Some Motivating Facts January 16, 2018 7 / 10

Predictability and Time variation (Mark) Some Motivating Facts January 16, 2018 8 / 10

Carry Trade Table 1 Monthly currency excess return summary statistics (1973.04–2014.12). P 1 P 2 P 3 P 4 P 5 P 6 Mean Currency Excess Return � 1.385 � 0.238 1.622 0.600 1.823 7.966 Sharpe Ratio � 0.053 � 0.008 0.061 0.021 0.059 0.232 Mean Interest Rate Differential � 2.838 � 1.023 0.535 2.297 4.755 17.336 Mean Exchange Rate Return 1.453 0.785 1.087 � 1.697 � 2.932 � 9.370 (Mark) Some Motivating Facts January 16, 2018 9 / 10

Carry Trade Fig. 1. Cumulated excess return in each of the six carry portfolios. The figure shows cumulated excess return (as raw numbers) of six interest-sorted portfolios over the US interest rate. Rolling over a USD 1 long position in P 6 minus rolling over a USD 1 short position in the USD beginning in April 1973 results in a net value of 3.32 in December 2014. (Mark) Some Motivating Facts January 16, 2018 10 / 10