Abstract

A recent study, employing structural vector autoregression (SVAR) methodology, finds that the U.S. stock market performance has a positive impact on the direction of the speculative yen carry trade activity using monthly positioning data of non-commercial traders in currency futures. However, I illustrate that this finding is not robust when weekly positioning data is introduced to the same methodology and sample period. Instead, I find that it is the fluctuations in the Japanese yen against the U.S. dollar exchange rate, rather than the U.S. stock market performance, that determines the direction of the yen carry trade. This represents that conclusions drawn from temporally aggregated data should be interpreted cautiously since temporal aggregation loses information about the underlying data processes.

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