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Journal of Financial Economics Vol. 159 2024

Concealed carry

Spencer Andrews1; Riccardo Colacito2,3; Mariano Massimiliano Croce4,5; Federico Gavazzoni6

1 Financial Research (Hungary) · 2 Boston University · 3 University of North Carolina Health Care · 4 Centre for Economic Policy Research · 5 Bocconi University · 6 BI Norwegian Business School

open access

Abstract

The slope carry takes a long (short) position in the long-term bonds of countries with steeper (flatter) yield curves. The traditional carry takes a long (short) position in countries with high (low) short-term rates. We document that: (i) the slope carry return is slightly negative (strongly positive) in the pre (post) 2008 period, whereas it is concealed over longer samples; (ii) the traditional carry return is lower post-2008; and (iii) expected global growth and inflation declined post-2008. We connect these findings through an equilibrium model in which countries feature heterogeneous exposure to news shocks about global output and global inflation .

DOI
10.1016/j.jfineco.2024.103874
Volume
159
Pages
103874
Language
en
Sources
crossref bibtex:phds-export.bib openalex

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