We conjecture that the forward puzzle may reflect career risks. When professional investors observe public danger signals about a currency, they require a premium for holding it. We find evidence of this in Exchange Rate Mechanism rates. As deep discounts do signal danger, we next specify...

Does one make money trading on the deviations between observed bond prices and values proposed by bond-pricing models? We extend <link rid="b34">Sercu and Wu's (1997)</link> work to more models and more data, but we especially refine the methodology. In particular, we provide a normal-return benchmark that markedly...

With transaction costs for trading goods, the nominal exchange rate moves within a band around the nominal purchasing power parity (PPP) value. The authors model the behavior of the band and of the exchange rate within the band. The model explains why there are below-unity slope coefficients in...