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Political vs. Currency Premia in International Real Interest Differentials : a Study of Forward Rates for 24 Countries
Frankel, Jeffrey A.; MacArthur, Alan T. - 2021
Different approaches to quantifying the degree of capital mobility for a cross-section of currencies -- particularly saving-investment correlations and tests of real interest parity - have appeared to show a surprisingly low degree of financial market integration. We use a new data set, forward...
Persistent link: https://www.econbiz.de/10013231589
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The Term Structure of the Forward Premium
Hakkio, Craig S. - 2013
. The paper proposes an equilibrium theory of the term structure of the forward premium. By combining the theory of the term … expression for the expected one month forward premium. The theory will then impose highly non-linear cross equation restrictions … indicate that the data are consistent with the theory for Germany and inconsistent with the theory for Canada …
Persistent link: https://www.econbiz.de/10012754712
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Affine Models of Currency Pricing
Backus, David K.; Foresi, Silverio; Telmer, Chris - 2021
-varying risk premium, but theory has been largely unsuccessful in producing a risk premium with the requisite properties. We … characterize the risk premium in a general arbitrage-free setting and describe the features a theory must have to account for the …
Persistent link: https://www.econbiz.de/10013228018
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The Information in Long-Maturity Forward Rates : Implications for Exchange Rates and the Forward Premium Anomaly
Boudoukh, Jacob - 2005
consistent with economic theory. Forward interest rates also forecast future spot interest rates and future inflation. Thus, we …
Persistent link: https://www.econbiz.de/10012784029
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The Forward Premium Puzzle in a Two-Country World
Martin, Ian - 2011
I explore the behavior of asset prices and the exchange rate in a two-country world. When the large country has bad news, the relative price of the small country's output declines. As a result, the small country's bonds are risky, and uncovered interest parity fails, with positive excess returns...
Persistent link: https://www.econbiz.de/10013118842
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Tests of Rational Expectations and No Risk Premium in Forward Exchange Markats
Hsieh, David A. - 2009
This paper tests the hypothesis that traders have rational expeatations and charge no risk premium in the forward exchange market. It uses a statistical procedure which is consistent under a large class of heteroscedasticity, and a set of data which takes into account the institutional features...
Persistent link: https://www.econbiz.de/10013159483
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The Forward Premium is Still a Puzzle
Burnside, A. Craig - 2007
Lustig and Verdelhan (2007) argue that the excess returns to borrowing US dollars and lending in foreign currency quot;compensate US investors for taking on more US consumption growth risk,quot; yet the stochastic discount factor corresponding to their benchmark model is approximately...
Persistent link: https://www.econbiz.de/10012776875
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The Covariation of Risk Premiums and Expected Future Spot Exchange Rates
Hodrick, Robert J. - 2010
Fama(1984) analyzed the variability and the covariation of risk premiums and expected rates of depreciation. We employ three statistical techniques that do not suffer from a potential bias in Fama's analysis, but we nevertheless confirm his findings. In contrast to his interpretation the results...
Persistent link: https://www.econbiz.de/10012762951
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Forward and Spot Exchange Rates in a Multi-Currency World
Hassan, Tarek A. - 2014
Separate literatures study violations of uncovered interest parity (UIP) using regression-based and portfolio-based methods. We propose a decomposition of these violations into a cross-currency, a between-time-and-currency, and a cross-time component that allows us to analytically relate...
Persistent link: https://www.econbiz.de/10013050308
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Exchange Rate Expectations and the Risk Premium : Tests for a Cross- Section of 17 Currencies
Chinn, Menzie David; Frankel, Jeffrey A. - 2021
Survey data on a broad cross section of 17 currencies are used to determine whether the forward discount moves primarily in response to changes in expectations of depreciation, or in the risk premium. We find that changes in expected depreciation are quantitatively significant. However we also...
Persistent link: https://www.econbiz.de/10013226178