Journal Article10.1016/0304-3932(84)90046-1
Forward and spot exchange rates
TL;DR: In this paper, the authors find that most of the variation in forward rates is variation in premium, and the premium and expected future spot rate components of forward rates are negatively correlated, and they conclude that the forward market is not efficient or rational.
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About: This article is published in Journal of Monetary Economics. The article was published on 01 Nov 1984. The article focuses on the topics: Forward exchange rate & Forward premium anomaly.
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Citations
The information content of interest rate futures and time-varying risk premia
TL;DR: In this article, the authors examined the price discovery hypothesis in the short sterling futures market and found that it holds for up to seven weeks prior to maturity of the futures contract and that the premium and the expected spot change volatility are statistically significant.
8
Three essays in international finance and macroeconomics
Simplice Aimé Nono
- 01 Jan 2017
TL;DR: In this paper, the impact of information on macroeconomic forecasting is examined and a learning-based explanation for the forward premium puzzle is proposed. But, the authors do not consider the effect of information from confidence survey data in forecasting real economic activity, only the data generated with active informational friction replicates the puzzle.
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The False Teachings of the Unbiased Expectations Hypothesis
Don M. Chance,Don R. Rich +1 more
TL;DR: The authors argue that the unbiased expectations hypothesis often forms the basis for trading strategies only because of the zero initial value and non-zero future value, the misuse of forwards in performance attribution, and a misunderstanding of the symmetry of risk premiums.
8
Testing the Hypothesis of Market Efficiency in the Taiwan-U.S. Forward Exchange Market Since 1990
TL;DR: In this paper, the authors examined the applicability of the hypothesis of market efficiency in Taiwan's foreign exchange market using daily data and employed the Markov switching approach to analyse this.
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Non-linear risk premia
TL;DR: Time-varying risk premia exist for the seven currencies examined and also exhibit non-linearity in the condition mean, provided expectations are formed rationally as mentioned in this paper, which offers one explanation that the forward premia squared can be a significant determinant of the difference between the future spot rate and forward rate.
8
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