Low-Frequency FX Anomalies: Carry, Momentum, and Value
Summary
The document points readers studying foreign-exchange inefficiency toward three low-frequency patterns: carry, momentum, and value. It names a survey on currency carry returns, an overview of FX momentum, and purchasing power parity as a way to frame currency value. It also recommends a broad currency-investing overview and a paper on market makers, inventory control, and FX dynamics as starting points for further reading.
The response is a brief research guide, not an empirical review or trading recipe. It does not provide methods, datasets, performance estimates, or detailed citations within the text, and the suggested anomalies are said to occur in other markets too. The answer cautions that translating published findings into practice is difficult and that the strength of the effects is disputed. Readers therefore need to inspect the underlying studies, definitions, costs, and implementation assumptions before treating these patterns as evidence of usable inefficiency.
Key ideas
- The answer identifies carry, momentum, and value as prominent low-frequency FX anomalies.
- Currency value is framed through relative purchasing power parity.
- It recommends surveys and overviews as entry points into the research literature.
- The answer warns that practical implementation is difficult and the evidence is contested.
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Full text
# Is there any good academic references for Forex inefficiency? # Is there any good academic references for Forex inefficiency? I am PhD in computer science, and I am pretty much clueless where can I look for good journals or conferences for Forex that talked about its inefficiency. Is there any good journals, conferences that has research papers covering this in a practical way? Or any particular research papers you would recommend? ## Answer by rupweb (score 1) https://quant.stackexchange.com/a/33775 You could try Market-maker, inventory control and foreign exchange dynamics by Westerhoff and follow the references... ## Answer by Alex C (score 1) https://quant.stackexchange.com/a/33836 Arguably the top 3 anomalies for FX (at low frequencies, i.e not HFT) are Carry, Momentum and Value, which are found in some markets other than FX as well. There is a vast literature on these. For Carry I recommend a survey by Swinkels Empirical Evidence on the Currency Carry Trade, 1900-2012 For Momentum in FX this link is good Quantpedia: FX Momentum "Value" in FX is generally equivalent with Relative Purchasing Power Parity, again Quantpedia has an overview Quantpedia: FX Value - PPP It is a huge area you ask about, too big to address really without knowing what you are trying to do. If you want a single overview of FX strategies a source also referenced in several of the above links is Levich: A New Look at Currency Investing One final warning: it is a lot more difficult to put into practice these ideas, and a lot more controversial how well they work, than these references make it seem.
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