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dc.contributor.authorChakraborty, Avik, 1975-
dc.contributor.authorHaynes, Stephen E., 1945-
dc.date.accessioned2005-12-15T16:43:08Z
dc.date.available2005-12-15T16:43:08Z
dc.date.issued2005-09-15
dc.identifier.urihttp://hdl.handle.net/1794/1928
dc.description23 p.en
dc.description.abstractThis 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.extent174479 bytes
dc.format.mimetypeapplication/pdf
dc.language.isoen_USen
dc.publisherUniversity of Oregon, Dept of Economicsen
dc.relation.ispartofseriesUniversity of Oregon Economics Department Working Papers ; 2005-18en
dc.subjectForward premium puzzleen
dc.subjectSpot and forward exchange ratesen
dc.subjectForeign exchange market efficiencyen
dc.subjectNon-rationality in foreign exchange marketsen
dc.titleEconometrics of the forward premium puzzleen
dc.typeWorking Paperen


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