Emerging vs. developed: a comparative analysis of carry trade and momentum strategies in foreign exchange markets

Abstract

This paper focuses on two popular speculation strategies performed in foreign exchange markets: Carry trade and momentum. These strategies were applied individually using currencies from both emerging and developed markets examining whether an expansion of the range of available currencies leads to better returns. The group report seeks to combine five strategies from different regions and markets: the Volatility Timing & Momentum, the Value Premium, the Efficiency & Growth, the Investor Sentiment & Volatility Timing, and the Carry & Momentum. The Equal-weighted (EW), the Tangency (TP), and the Global Minimum Variance (GMV) portfolios were created to combine the above-mentioned portfolios.