This paper explores the usefulness of currency futures-spot basis in predicting spot rate changes and currency futures returns. We conjecture that the currency risk premium may be an important component of the basis for long-maturity futures contracts, but may not be so for short-maturities....

This study investigates the relationship between currencies and interest rates of different maturity horizons. The real exchange rate is found to depend both on short-term real domestic and foreign interest rate difference and on long-term real domestic and foreign interest rate difference....

The effects of the Exchange Rate Mechanism (ERM) of 1991-1993 on currency markets are examined. It is shown that the mechanism has led to a regime shift going from the 1980s to the 1990s. The floating exchange rates of the 1980s are associated with the forward premium puzzle (FPP) in spot...

This paper examines the historical predictive power of future spot spread in estimating currency changes. Currency futures and spot rates over the last two decades are examined. Results show that as forecast horizon of currency depreciation increases, the slope coefficients become less positive,...

We construct an international term structure model that has excellent empirical performance in tracking movements of exchange rates and currency returns. The forward premium puzzle is accounted for, yet the model does not have the undesirable properties found in Backus et al. (J. Finance 56...

Japanese yen currency dynamics are investigated in spot and futures markets. Maturity is proposed as a proxy for the time-varying risk premium. As the maturity of a yen futures contract nears, there is less uncertainty implying a small absolute risk premium. A longer maturity is associated with...

The impact of financial development of a country on the earnings, capital spending, and stock returns of the firms of that country is the subject of this study. There are two different financial development indices which are utilized. The first is based on Love (2003), and the second is based on...

In this study, a multi-country nonlinear model is constructed to simultaneously estimate the exchange rate dynamics and the term structure of interest rates in the US and in Switzerland. The model has better empirical performance compared to the earlier well-known affine international models....

This study examines short horizon currency futures returns. Expectations hypothesis or risk neutrality assumes an efficient market with no risk premium, and therefore no predictor for futures returns. Using the British, German, Swiss, Japanese, and Canadian currencies as well as pooled currency...

We examine Turkish fund portfolios and identify the role of international investments in their formation. We find that (1) Turkish funds hold a very small fraction of international assets during 1987-2008, (2) the weight of international equity in the funds with an international mandate is...