Year of Graduation
Main Determinants of the Currency Models
In this paper we investigate three popular currency strategies - carry, momentum and value and their return potential for the Russian investor with the Russian rouble as a base currency and whose returns are calculated in roubles. Using historical data we build different variations of the original strategies (including brand-new specification of the value model, interpolating PPP from annual to the monthly frequency), the comparison with the historical properties of the models, described in the previous studies is made, the relation between the strategies returns and the PPP, UIP, CIP is analyzed. We successfully show that it is possible to build value strategy for the sample of the developed countries currencies, which is "zero-investment-cost" and provides sustainable returns during the whole period under consideration - including the period of the world financial crisis and the Russian currency crisis. Furthermore, the returns of this strategy do not correlate with the returns of MICEX. Comparable results are proven for the value and momentum strategies built on the developing countries currencies.