The Time Variation of Risk and Return in Foreign Exchange Markets: A General Equilibrium Perspective.
This article successively introduces variable velocity, durability, and habit persistence in a standard two-country general equilibrium model and explores their effects on the variability of exchange rate changes, forward premiums, and the foreign exchange risk premium. A new feature of the model is that agents make decisions at a weekly frequency and face conditionally heteroskedastic shocks. Nevertheless, even the most complex model fails to deliver sufficiently variable risk premiums without causing forward premiums and exchange rates to be excessively variable. Unlike previous models, the model can roughly match the persistence of forward premiums. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.
Year of publication: |
1996
|
---|---|
Authors: | Bekaert, Geert |
Published in: |
Review of Financial Studies. - Society for Financial Studies - SFS. - Vol. 9.1996, 2, p. 427-70
|
Publisher: |
Society for Financial Studies - SFS |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
The global crisis and equity market contagion
Bekaert, Geert, (2014)
-
International stock return comovements
Bekaert, Geert, (2008)
-
What do asset prices have to say about risk appetite and uncertainty?
Bekaert, Geert, (2009)
- More ...