Properties Of Foreign Exchange Risk Premiums
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Properties Of Foreign Exchange Risk Premiums
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Author : Lucio Sarno
language : en
Publisher:
Release Date : 2011
Properties Of Foreign Exchange Risk Premiums written by Lucio Sarno and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with categories.
Properties Of Foreign Exchange Risk Premiums
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Author : Lucio Sarno
language : en
Publisher:
Release Date : 2016
Properties Of Foreign Exchange Risk Premiums written by Lucio Sarno and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
We study the properties of foreign exchange risk premiums that can explain the forward bias puzzle, defined as the tendency of high-interest rate currencies to appreciate rather than depreciate. These risk premiums arise endogenously from the no-arbitrage condition relating the term structure of interest rates and exchange rates. Estimating affine (multi-currency) term structure models reveals a noticeable tradeoff between matching depreciation rates and accuracy in pricing bonds. Risk premiums implied by our global affine model generate unbiased predictions for currency excess returns and are closely related to global risk aversion, the business cycle, and traditional exchange rate fundamentals.
On Time Series Properties Of Time Varying Risk Premium In The Yen Dollar Exchange Market
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Author : Fabio Canova
language : en
Publisher:
Release Date : 1988
On Time Series Properties Of Time Varying Risk Premium In The Yen Dollar Exchange Market written by Fabio Canova and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1988 with Foreign exchange categories.
The purpose of this paper is to characterize the changes in risk premium in the 1980s. A five-variable vector autoregressive model (VAR) is constructed to calculate a risk premium series in the foreign exchange market. The risk premium series is volatile and time-varying. The hypothesis of no risk premium is strongly rejected for the entire sample and each of the two subsamples considered. Various tests using the constructed risk premium series suggest that a risk premium existed but it was neither constant nor stable over subsamples and that its volatility was considerably reduced after October 1982.
Currency Risk Premia In Global Stock Markets
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Author : Shaun K. Roache
language : en
Publisher: International Monetary Fund
Release Date : 2006-08
Currency Risk Premia In Global Stock Markets written by Shaun K. Roache and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006-08 with Business & Economics categories.
Large fundamental imbalances persist in the global economy, with potential exchange rate implications. This paper assesses whether exchange rate risk is priced across G-7 stock markets. Given the multitude of hedging instruments available, theory suggests that stock market investors should not be compensated for currency risk. However, data covering 33 industry portfolios across seven major stock markets suggest that not only is exchange rate risk priced in many markets, but that it is time-varying and sensitive to currency-specific shocks. With stock market investors typically exhibiting "home bias," this suggests that investors are using equity asset proxies to hedge the exchange rate risks to consumption.
The Time Variation Of Risk And Return In Foreign Exchange Markets
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Author : Geert Bekaert
language : en
Publisher:
Release Date : 1994
The Time Variation Of Risk And Return In Foreign Exchange Markets written by Geert Bekaert and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1994 with Foreign exchange categories.
The Foreign Exchange Market
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Author : Richard T. Baillie
language : en
Publisher: Cambridge University Press
Release Date : 1989
The Foreign Exchange Market written by Richard T. Baillie and has been published by Cambridge University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 1989 with Business & Economics categories.
The flotation of exchange rates in the early 1970s saw a significant increase in the importance of foreign exchange markets and in the interest shown in them. Apart from the consequent institutional changes, this period also witnessed a revolution in macroeconomic analysis and finance theory based on the concept of rational expectations. This book provides an integrated approach to recent developments in the understanding of foreign exchange markets. It begins by charting the institutional background and looks at the recent history of movements in some of the major exchange rates. The theoretical sections focus on the economic and finance theory of the asset market approach, the macroeconomic models developed from this approach, and on interest rate parity theory. The empirical chapters draw on the authors' own research from a high quality set of exchange rate and interest rate data. The statistical properties of exchange rates are analysed; the relationship between spot and forward rates is examined; and the modelling and impact of new information on the forward and spot relationship is considered. The final chapter is devoted to the estimation and testing of exchange rate models.
The Forward Discount Anomaly And The Risk Premium
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Author : Charles Engel
language : en
Publisher:
Release Date : 1995
The Forward Discount Anomaly And The Risk Premium written by Charles Engel and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1995 with Foreign exchange futures categories.
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 discount. Properties of the expected forward forecast error are reviewed. Issues such as the relation of uncovered interest parity to real interest parity, and the implications of uncovered interest parity for cointegration of various quantities are discussed. The modeling and testing for risk premiums is surveyed. Included in this area are tests of the consumption CAPM, tests of the latent variable model, and portfolio-balance models of risk premiums. General equilibrium models of the risk premium are examined and their empirical implications explored. The survey does not cover the important areas of learning and peso problems, tests of rational expectations based on survey data, or the models of irrational expectations and speculative bubbles.
On Some Parametric And Nonparametric Characterizations Of Exchange Risk Premia
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Author : Kpate Adjaoute
language : en
Publisher:
Release Date : 1998
On Some Parametric And Nonparametric Characterizations Of Exchange Risk Premia written by Kpate Adjaoute and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1998 with categories.
Acceptance or rejection of the risk premium hypothesis in the foreign exchange market often rests on some parametric statistical specification or asset pricing framework. Empirical evidence to date on this issue has been contingent upon the approach taken. After throwing light on the empirical regularities of the forward exchange bias, we take a more flexible nonparametric approach to characterizing the forward risk premium. Using a sample of ten exchange rates relative to the Swiss franc, we find evidence consistent with Fama's [1984] argument and Peel's [1993] results that risk premia exist and exhibit nonlinearity in condition mean, thus challenging traditional linear representations. Under the alternative hypothesis of nonlinear dynamics, the null of linearity was rejected for seven currencies at the usual confidence levels. Contrary to previous studies, the most parsimonious representation of nonlinear risk premia was evidenced through penalized least squares in the now popular smoothing spline framework. This finding, coupled with other empirical time series properties of exchange risk premia, sets the ground for proper specifications in tests of the unbiasedness hypothesis of the forward rate, as well as in models of international asset pricing where exchange rate risk premia are invoked. However, questions pertaining to the fairness of the risk premium component are not in the scope of this paper and are left for future research.
The Exchange Risk Premium Uncovered Unterest Parity And The Treatment Of Exchange Rates In Multicountry Macroeconomic Models
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Author : Ralph C. Bryant
language : en
Publisher:
Release Date : 1995
The Exchange Risk Premium Uncovered Unterest Parity And The Treatment Of Exchange Rates In Multicountry Macroeconomic Models written by Ralph C. Bryant and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1995 with Foreign exchange categories.
A Study Of Risk Premiums In The Foreign Exchange Market
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Author : Bonghan Kim
language : en
Publisher:
Release Date : 1997
A Study Of Risk Premiums In The Foreign Exchange Market written by Bonghan Kim and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1997 with categories.