Quants Find a Market Corner Where Value Trades Still Work
- FX value strategy beats trend-following and the carry trade
- Carry trades are losing favor in a world of near-zero rates
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Trading stocks based on valuation has lashed some of the smartest stock traders on Wall Street, but it’s a winning formula in the world of foreign exchange.
A Bloomberg-Goldman Sachs Asset Management index that buys cheap currencies in the Group-of-10 and shorts expensive ones is up 5.4% over the past year -- trouncing measures that mimic strategies such as trend-following and the carry trade, which have dropped 3.7% and 7.6% respectively.