Is it risk? : Explaining deviations from uncovered interest parity
AbstractThis paper analyzes ex-ante returns to forward speculation and asks if these returns can be explained by models of a foreign exchange risk premium. After presenting evidence that both nominal and real expected speculative profits are non-zero, the paper examines if real returns to forward speculation are consistent with consumption-based models of risk premia. Estimates of the conditional covariance between real speculative returns and real consumption growth are presented and, like ex-ante returns to forward speculation, they exhibit statistically significant fluctuations over time and often change sign.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Monetary Economics.
Volume (Year): 22 (1988)
Issue (Month): 2 (September)
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Web page: http://www.elsevier.com/locate/inca/505566
Other versions of this item:
- Robert E. Cumby, 1987. "Is it Risk? Explaining Deviations from Uncovered Interest Parity," NBER Working Papers 2380, National Bureau of Economic Research, Inc.
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- Maurice Obstfeld & Robert E. Cumby & John Huizinga, 1983.
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