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 InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2380.
Date of creation: Sep 1987
Date of revision:
Publication status: published as Journal of Monetary Economics, Vol. 22, pp. 279-299, September 1988.
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Other versions of this item:
- Cumby, Robert E., 1988. "Is it risk? : Explaining deviations from uncovered interest parity," Journal of Monetary Economics, Elsevier, vol. 22(2), pages 279-299, September.
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NBER Working Papers
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NBER Technical Working Papers
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