Carry trades, order flow, and the forward bias puzzle

dc.contributor.author	Breedon, Francis
dc.contributor.author	Rime, Dagfinn
dc.contributor.author	Vitale, Paolo
dc.date.accessioned	2016-09-08T07:02:29Z
dc.date.available	2016-09-08T07:02:29Z
dc.date.issued	2016
dc.identifier.citation	Journal of Money, Credit and Banking, 48(2016)6: 1113-1134	nb_NO
dc.identifier.issn	0022-2879
dc.identifier.issn	1538-4616
dc.identifier.uri	http://hdl.handle.net/11250/2405230
dc.description	This is the accepted, refereed and final manuscript to the article	nb_NO
dc.description.abstract	We investigate the relation between foreign exchange (FX) order ow and the forward bias. We outline a decomposition of the forward bias according to which a negative correlation between interest rate di erentials and order ow creates a time-varying risk premium consistent with that bias. Using ten years of data on FX order ow we nd that more than half of the forward bias is accounted for by order ow \| with the rest being explained by expectational errors. We also nd that carry trading increases currency-crash risk in that order ow generates negative skewness in FX returns.	nb_NO
dc.language.iso	eng	nb_NO
dc.publisher	Wiley	nb_NO
dc.title	Carry trades, order flow, and the forward bias puzzle	nb_NO
dc.type	Journal article	nb_NO
dc.type	Peer reviewed	nb_NO
dc.source.journal	Journal of Money, Credit and Banking	nb_NO
dc.identifier.doi	http://dx.doi.org/10.1111/jmcb.12328
dc.description.localcode	2, Forfatterversjon	nb_NO