Advanced Search
MyIDEAS: Login to save this article or follow this journal

The Japanese yen futures returns, spot returns, and the risk premium

Contents:

Author Info

  • Inci, Ahmet Can
Registered author(s):

    Abstract

    Japanese yen currency dynamics are investigated in spot and futures markets. Maturity is proposed as a proxy for the time-varying risk premium. As the maturity of a yen futures contract nears, there is less uncertainty implying a small absolute risk premium. A longer maturity is associated with uncertainty about the economy, the underlying currency, and the contract; and implies a high risk premium. Models that include maturity in addition to the futures-spot basis as explanatory variables exhibit better empirical performance in explaining futures returns and spot returns. The results are robust to different sample periods, forecast horizons, and estimation techniques.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.sciencedirect.com/science/article/B6W4F-4PNFV7P-4/1/8fef4b03664fdf231530c5c06c366f09
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Bibliographic Info

    Article provided by Elsevier in its journal Global Finance Journal.

    Volume (Year): 18 (2008)
    Issue (Month): 3 ()
    Pages: 385-399

    as in new window
    Handle: RePEc:eee:glofin:v:18:y:2008:i:3:p:385-399

    Contact details of provider:
    Web page: http://www.elsevier.com/locate/inca/620162

    Related research

    Keywords:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Frankel, Jeffrey A. & Froot, Kenneth A., 1987. "Short-term and long-term expectations of the yen/dollar exchange rate: Evidence from survey data," Journal of the Japanese and International Economies, Elsevier, Elsevier, vol. 1(3), pages 249-274, September.
    2. Hartmann,Philipp, 1998. "Currency Competition and Foreign Exchange Markets," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521632737.
    3. Whitney K. Newey & Kenneth D. West, 1986. "A Simple, Positive Semi-Definite, Heteroskedasticity and AutocorrelationConsistent Covariance Matrix," NBER Technical Working Papers, National Bureau of Economic Research, Inc 0055, National Bureau of Economic Research, Inc.
    4. Hsieh, David A, 1989. "Modeling Heteroscedasticity in Daily Foreign-Exchange Rates," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 7(3), pages 307-17, July.
    5. Robert P. Flood & Andrew K. Rose, 2002. "Uncovered Interest Parity in Crisis," IMF Staff Papers, Palgrave Macmillan, Palgrave Macmillan, vol. 49(2), pages 6.
    6. Doukas, John & Rahman, Abdul, 1987. "Unit Roots Tests: Evidence from the Foreign Exchange Futures Market," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 22(01), pages 101-108, March.
    7. Bansal, Ravi, 1997. "An Exploration of the Forward Premium Puzzle in Currency Markets," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 10(2), pages 369-403.
    8. David K. Backus, 2001. "Affine Term Structure Models and the Forward Premium Anomaly," Journal of Finance, American Finance Association, American Finance Association, vol. 56(1), pages 279-304, 02.
    9. Tse, Yiuman & Booth, G Geoffrey, 1996. "Risk Premia in Foreign Currency Futures: A Reexamination," The Financial Review, Eastern Finance Association, Eastern Finance Association, vol. 31(3), pages 521-34, August.
    10. Inci, Ahmet Can, 2005. "ERM effects on currency spot and futures markets," Global Finance Journal, Elsevier, Elsevier, vol. 16(2), pages 145-163, December.
    11. Taylor, Stephen J, 1992. "Rewards Available to Currency Futures Speculators: Compensation for Risk or Evidence of Inefficient Pricing?," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 0(0), pages 105-16, Supplemen.
    12. Baillie, Richard T. & Bollerslev, Tim, 2000. "The forward premium anomaly is not as bad as you think," Journal of International Money and Finance, Elsevier, Elsevier, vol. 19(4), pages 471-488, August.
    13. Hsieh, David A., 1993. "Implications of Nonlinear Dynamics for Financial Risk Management," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 28(01), pages 41-64, March.
    14. Jon Faust & John H. Rogers & Jonathan H. Wright, 2001. "Exchange rate forecasting: the errors we've really made," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 714, Board of Governors of the Federal Reserve System (U.S.).
    15. 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, Elsevier, vol. 28(8), pages 1595-1624, June.
    16. Guy Meredith & Menzie D. Chinn, 1998. "Long-Horizon Uncovered Interest Rate Parity," NBER Working Papers 6797, National Bureau of Economic Research, Inc.
    17. Sequeira, John M & McAleer, Michael & Chow, Ying-Foon, 2001. "Efficient Estimation and Testing of Alternative Models of Currency Futures Contracts," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 77(238), pages 270-82, September.
    18. Baxter, Marianne, 1994. "Real exchange rates and real interest differentials: Have we missed the business-cycle relationship?," Journal of Monetary Economics, Elsevier, Elsevier, vol. 33(1), pages 5-37, February.
    19. Charles Engel & Kenneth D. West, 2004. "Accounting for Exchange Rate Variability in Present-Value Models When the Discount Factor is Near One," NBER Working Papers 10267, National Bureau of Economic Research, Inc.
    20. Fama, Eugene F., 1984. "Forward and spot exchange rates," Journal of Monetary Economics, Elsevier, Elsevier, vol. 14(3), pages 319-338, November.
    21. Harrison Hong, 2000. "A Model of Returns and Trading in Futures Markets," Journal of Finance, American Finance Association, American Finance Association, vol. 55(2), pages 959-988, 04.
    22. Longstaff, Francis A., 2000. "The term structure of very short-term rates: New evidence for the expectations hypothesis," Journal of Financial Economics, Elsevier, Elsevier, vol. 58(3), pages 397-415, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:eee:glofin:v:18:y:2008:i:3:p:385-399. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.