Yesterday, I started my trilogy on investment research by pointing out that a good researcher should focus on what matters. I stressed that this means a focus on what matters in real life, rather than what should matter in theory. But, and this affects in particular economists and only to a lesser degree strategists and research analysts, too many people think that if they have a theory of how the world works, this theory justifies a certain approach to examining financial markets or the economy.
You can throw in uncovered Interest parity as a theory that economists genuflect before, but doesn’t hold in real life. If it did the FX carry trade would never have worked.
You can throw in uncovered Interest parity as a theory that economists genuflect before, but doesn’t hold in real life. If it did the FX carry trade would never have worked.