Interpreting the Forward Premium Anomaly
AbstractOne of the central issues in international finance concerns the forward premium anomaly: changes in spot exchange rates are inversely related to the premium of forward rates over spot rates. The authors construct a numerical example of a theoretical economy with this property and discuss its potential as an explanation of the anomaly.
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Bibliographic InfoArticle provided by Canadian Economics Association in its journal Canadian Journal of Economics.
Volume (Year): 28 (1995)
Issue (Month): s1 (November)
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Postal: Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4
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- Maurice J. Roche & Michael J. Moore, 1999.
"Less of a puzzle: a new look at the forward forex market,"
Economics, Finance and Accounting Department Working Paper Series
n910799, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
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- Inci, Ahmet Can & Lu, Biao, 2007. "Currency futures-spot basis and risk premium," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 17(2), pages 180-197, April.
- Karen K. Lewis, 2011. "Global asset pricing," Globalization and Monetary Policy Institute Working Paper 88, Federal Reserve Bank of Dallas.
- Inci, Ahmet Can & Lu, Biao, 2004. "Exchange rates and interest rates: can term structure models explain currency movements?," Journal of Economic Dynamics and Control, Elsevier, vol. 28(8), pages 1595-1624, June.
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