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Some Empirical Observations on the Forward Exchange Rate Anomaly Author info | Abstract | Publisher info | Download info | Related research | Statistics Derek Bond () (University of Ulster)
Michael J. Harrison () (Department of Economics, Trinity College)
Niall Hession (University of Ulster)
Edward J. O'Brien () (Department of Economics, Trinity College and CBFSAI)
Additional information is available for the following
registered author(s):
This paper looks at issues surrounding the testing of fractional integration and nonlinearity in relation to the forward exchange rate anomaly of Fama (1984). Recent tests for fractional integration and nonlinearity are discussed and used to investigate the behaviour of three exchange rates and premiums. The findings provide some support for I(1) exchange rates but suggest fractionality for premiums, mixed evidence on cointegration, and a strong possibility of time-wise nonlinearity. Significantly, when the nonlinearity is modelled using a random field regression, the forward anomaly disappears.
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Paper provided by Trinity College Dublin, Department of Economics in its series Trinity Economics Papers with number
tep2006.
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Length: 25 pages
Date of creation: Jan 2006Date of revision:
Handle: RePEc:tcd:tcduee:tep2006Contact details of provider: Postal: Trinity College, Dublin 2 Phone: (+ 353 1) 6081325 Fax: 6772503 Web page: http://www.tcd.ie/Economics/ More information through EDIRC
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Find related papers by JEL classification: C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions F31 - International Economics - - International Finance - - - Foreign Exchange F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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Derek Bond & Michael J. Harrison & Edward J. O'Brien, 2006.
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