IDEAS home Printed from https://ideas.repec.org/a/cje/issued/v44y2011i3p880-906.html

Risk aversion, exchange-rate uncertainty, and the law of one price: insights from the market for online air-travel tickets

Author

Listed:
  • Michael G. Arghyrou
  • Andros Gregoriou
  • Panayiotis M. Pourpourides

Abstract

We argue that risk aversion driven by exchange-rate uncertainty causes a wedge between the domestic and foreign prices of a homogeneous good. We test our hypothesis using a unique micro-data set from a market with minimum imperfections. The empirical findings validate our hypothesis, as accounting for exchange-rate uncertainty we are able to explain a significant proportion of deviations from the law of one price. Overall, our analysis suggests the possibility of a new solution to the purchasing power parity puzzles.

Suggested Citation

  • Michael G. Arghyrou & Andros Gregoriou & Panayiotis M. Pourpourides, 2011. "Risk aversion, exchange-rate uncertainty, and the law of one price: insights from the market for online air-travel tickets," Canadian Journal of Economics, Canadian Economics Association, vol. 44(3), pages 880-906, August.
    • Handle: RePEc:cje:issued:v:44:y:2011:i:3:p:880-906
    DOI: 10.1111/j.1540-5982.2011.01659.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1540-5982.2011.01659.x
    Download Restriction: access restricted to subscribers
    File URL: https://libkey.io/10.1111/j.1540-5982.2011.01659.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or

    for a different version of it.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Arghyrou, Michael G. & Kontonikas, Alexandros, 2012. "The EMU sovereign-debt crisis: Fundamentals, expectations and contagion," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(4), pages 658-677.

    More about this item

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cje:issued:v:44:y:2011:i:3:p:880-906. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Prof. Werner Antweiler (email available below). General contact details of provider: https://edirc.repec.org/data/ceaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.