This study reappraises the evidence for nonlinear dependence in the monthly black market exchange returns of the Polish zloty, 1955-1990. Predictive asymmetry is reported in conditional variance such that depreciatory shocks have a greater impact on subsequent volatility than appreciatory shocks, jointly with conditional mean nonlinearity of smooth transition between regimes which suggests a simple trading strategy capable of generating positive profit over the sample period. However, support is also found for a competing variance-in-mean model consistent with a time-varying risk premium that is able to rationalize the presence of unexploited profit opportunities, particularly over the latter half of the sample. Copyright 2001 by Taylor and Francis Group
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Volume (Year): 11 (2001) Issue (Month): 2 (April) Pages: 209-20 Download reference. The following formats are available: HTML
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