dc.contributor.author |
Chakraborty, Avik, 1975- |
|
dc.contributor.author |
Haynes, Stephen E., 1945- |
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dc.date.accessioned |
2005-12-15T16:43:08Z |
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dc.date.available |
2005-12-15T16:43:08Z |
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dc.date.issued |
2005-09-15 |
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dc.identifier.uri |
http://hdl.handle.net/1794/1928 |
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dc.description |
23 p. |
en |
dc.description.abstract |
This paper explores from a new perspective the forward premium puzzle, i.e., why a regression of the change in the future spot exchange rate on the forward premium paradoxically yields a coefficient that is frequently negative. This traditional specification is compared theoretically and empirically to a "level" regression of the future spot rate on the current forward rate, which does not display the puzzle. We explore both non-rationality and risk premium explanations. The general conclusionis that, with non-rationality, any modest deviation from unity in the level coefficient becomes greatly magnified in the forward premium coefficient because of the stationary/nonstationary properties of the relevant variables, thereby generating the puzzle. |
en |
dc.format.extent |
174479 bytes |
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dc.format.mimetype |
application/pdf |
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dc.language.iso |
en_US |
en |
dc.publisher |
University of Oregon, Dept of Economics |
en |
dc.relation.ispartofseries |
University of Oregon Economics Department Working Papers ; 2005-18 |
en |
dc.subject |
Forward premium puzzle |
en |
dc.subject |
Spot and forward exchange rates |
en |
dc.subject |
Foreign exchange market efficiency |
en |
dc.subject |
Non-rationality in foreign exchange markets |
en |
dc.title |
Econometrics of the forward premium puzzle |
en |
dc.type |
Working Paper |
en |