Currency Momentum, Carry Trade, and Market Illiquidity

摘要: This study empirically examines the effect of equity market illiquidity on excess returns currency momentum and carry trade strategies. Results show that explains evolution strategy payoffs, but not trade. Returns are low following months high illiquidity. However, in recent decade, positively predicts associated payoffs. The findings withstand various robustness checks economically significant, approximating value to one-third average monthly profits.