01722cas a2200241 a 4500 AALejournalIMF006289 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451962864 1018-5941 BD-DhAAL BD-DhAAL Nozaki, Masahiro. Do Currency Fundamentals Matter for Currency Speculators? / Masahiro Nozaki. Washington, D.C. : International Monetary Fund, 2010. 1 online resource (34 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students The answer seems affirmative. We compare currency carry trades with an investment strategy based on currency fundamentals: taking a long (short) position in undervalued (overvalued) currencies. Carry trades have high risk-adjusted returns, but are subject to "crash risk." In contrast, the fundamental strategy has lower risk-adjusted returns, but is less prone to crash risk, because the realization of crash risk coincides with corrections towards fundamentals. In particular, the fundamental strategy outperformed carry trades during the recent global financial crisis. Building on these results, we present early warning indicators for potential turbulence in the currency market. Mode of access: Internet IMF Working Papers; Working Paper ; No. 2010/039 Full text available on IMF http://elibrary.imf.org/view/journals/001/2010/039/001.2010.issue-039-en.xml IMF e-Library