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The Covariation of Risk Premiums and Expected Future Spot Exchange Rates
Hodrick, Robert J. - 1985
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/10012477330
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Tests of Rational Expectations and No Risk Premium in Forward Exchange Markats
Hsieh, David A. - 1982
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/10012478268
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The Term Structure of the Forward Premium
Hakkio, Craig S. - 1980
. 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/10012478719
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Pricing Currency Risks
Chernov, Mikhail - 2020
The currency market features a relatively small cross-section and conditional expected returns can be characterized by only a few signals - interest differentials, trend, and mean-reversion. We exploit these properties to construct a conditional projection of the stochastic discount factor onto...
Persistent link: https://www.econbiz.de/10012482479
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The Forward Premium is Still a Puzzle
Burnside, Craig - 2007
Lustig and Verdelhan (2007) argue that the excess returns to borrowing US dollars and lending in foreign currency "compensate US investors for taking on more US consumption growth risk," yet the stochastic discount factor corresponding to their benchmark model is approximately uncorrelated with...
Persistent link: https://www.econbiz.de/10012465525
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Risk and Exchange Rates
Obstfeld, Maurice - 1998
This paper develops an explicitly stochastic new open economy macroeconomics' model, which can potentially be used to explore the qualitative and quantitative welfare differences between alternative exchange rate regimes. A crucial feature is that we do not simplify by assuming certainty...
Persistent link: https://www.econbiz.de/10012472119
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Affine Models of Currency Pricing
Backus, David - 1996
-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/10012473222
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The Forward Discount Anomaly and the Risk Premium : A Survey of Recent Evidence
Engel, Charles - 1995
Forward exchange rate unbiasedness is rejected in tests from the current floating exchange rate era. This paper surveys advances in this area since the publication of Hodrick's (1987) survey. It documents that the change in the future exchange rate is generally negatively related to the forward...
Persistent link: https://www.econbiz.de/10012473558
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Exchange Rate Expectations and the Risk Premium : Tests For a Cross- Section of 17 Currencies
Frankel, Jeffrey - 1991
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/10012475190
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Political vs. Currency Premia in International Real Interest Differentials : A Study of Forward Rates for 24 Countries
Frankel, Jeffrey A. - 1987
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/10012476759