This paper studies the role the stock market plays in determining the carry trade return. Evidence shows stock market returns significantly affect the carry trade returns in Australia, Mexico, Japan, the UK, Sweden, and the Eurozone. This paper further examines three channels through which stock returns affect the carry trade returns: the Balassa-Samuelson, risk-premium, and flight-to-quality effects. Our model shows that the stock market impact on the carry trade return depends on stock market volatility, and the flight-to-quality effect prevails globally. Furthermore, the introduction of the stock return significantly improves the out-of-sample forecast of the carry trade return when the domestic market is volatile.

本文研究了股票市场在决定套利交易回报方面的作用。有证据表明，股票市场回报显着影响澳大利亚、墨西哥、日本、英国、瑞典和欧元区的套利交易回报。本文进一步研究了股票收益影响套利交易收益的三个渠道：巴拉萨-萨缪尔森效应、风险溢价和逃逸质量效应。我们的模型表明，股市对套利交易回报的影响取决于股市波动，而逃逸效应在全球普遍存在。此外，股票收益的引入显着改善了国内市场波动时套利交易收益的样本外预测。