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The Thursday effect of the forward premium puzzle

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  • Ding, Liang

Abstract

This paper examines the day-of-the-week effect for the forward premium puzzle. The paper finds that Thursday consistently appears to be a special day on which the deviation from the unbiasedness hypothesis is much less compared to other weekdays across currencies. In addition to Thursday, Monday is also found to be a similar special day for the Euro. The paper proposes that this Thursday effect (Monday effect for the Euro) is caused by monetary announcements released constantly on Tuesday (Thursday) by the FOMC (the European Central Bank). The paper provides extensive empirical evidence in favor of the proposed explanation.

Suggested Citation

  • Ding, Liang, 2012. "The Thursday effect of the forward premium puzzle," International Review of Economics & Finance, Elsevier, vol. 21(1), pages 302-318.
    • Handle: RePEc:eee:reveco:v:21:y:2012:i:1:p:302-318
    DOI: 10.1016/j.iref.2011.08.005
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    Cited by:

    1. Chu, Shiou-Yen, 2015. "Funding liquidity constraints and the forward premium anomaly in a DSGE model," International Review of Economics & Finance, Elsevier, vol. 39(C), pages 76-89.
    2. Nessrine Hamzaoui & Boutheina Regaieg, 2016. "The Glosten-Jagannathan-Runkle-Generalized Autoregressive Conditional Heteroscedastic approach to investigating the foreign exchange forward premium volatility," International Journal of Economics and Financial Issues, Econjournals, vol. 6(4), pages 1608-1615.
    3. Norman C. Miller, 2014. "Exchange Rate Economics," Books, Edward Elgar Publishing, number 14981.

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    More about this item

    Keywords

    Forward premium puzzle; Day-of-the-week effect; Central Bank; Monetary announcements;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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