The forward premium puzzle, or violation of the uncovered interest rate parity (UIP), has been documented by many. Studies, using methodologies more sophisticated than regression analysis, tend to suggest that the rejection of UIP may be false, due to cointegration, biased parameter estimates, time-varying risk premium, etc. In this study, from data for the two decades (1979-1998) and nine major currencies of the developed world, it is shown that the forward premium puzzle is not always present for any arbitrary time period, or for any pair of countries, even using the regression analysis that established the puzzle in earlier works.
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Volume (Year): 11 (2004) Issue (Month): 2 (February) Pages: 131-134 Download reference. The following formats are available: HTML
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