The existence of systematic profits in the carry trade seems to violate which of the following?
A) the principle of reason
B) the efficient markets hypothesis combined with UIP and rational expectations
C) the principle of second best
D) the principle of "two out of three"

Question

Quizplus · Accepted Answer

The efficient markets hypothesis combined with unified international parity (UIP) and rational expectations posits that there should be no systematic profits in the carry trade. Therefore, the existence of such profits would violate this economic theory.

The Existence of Systematic Profits in the Carry Trade Seems