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On Estimating Risk Premium With Flexible Fourier Form

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Listed:
  • Jing Li

    (Miami University)

Abstract

This paper proposes a semi-parametric estimate of risk premium using the Flexible Fourier From with a small number of low-frequency components. We provide an application to the forecast error decomposition based on the uncovered interest rate parity (UIP). Limited support is found for the omitted-variable explanation of the UIP puzzle.

Suggested Citation

  • Jing Li, 2021. "On Estimating Risk Premium With Flexible Fourier Form," Economics Bulletin, AccessEcon, vol. 41(3), pages 1026-1035.
    • Handle: RePEc:ebl:ecbull:eb-20-00183
    as

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    References listed on IDEAS

    as
    1. Li, Dandan & Ghoshray, Atanu & Morley, Bruce, 2012. "Measuring the risk premium in uncovered interest parity using the component GARCH-M model," International Review of Economics & Finance, Elsevier, vol. 24(C), pages 167-176.
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    7. Mehra, Rajnish & Prescott, Edward C., 1988. "The equity risk premium: A solution?," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 133-136, July.
    8. Linton, Oliver & Perron, Benoit, 2003. "The Shape of the Risk Premium: Evidence from a Semiparametric Generalized Autoregressive Conditional Heteroscedasticity Model," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(3), pages 354-367, July.
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    JEL classification:

    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
    • F3 - International Economics - - International Finance

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