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Time-varying international diversification and the forward premium

  • Jonen, Benjamin
  • Scheuring, Simon
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    This paper reproduces the slope of the uncovered interest rate parity (UIP) regression for ten country pairs within one standard deviation under rational expectations. We propose an infinite horizon dynamic stochastic general equilibrium model with incomplete markets. Heterogeneous investors experience varying risk aversion as a result of habit formation.

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    Article provided by Elsevier in its journal Journal of International Money and Finance.

    Volume (Year): 40 (2014)
    Issue (Month): C ()
    Pages: 128-148

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    Handle: RePEc:eee:jimfin:v:40:y:2014:i:c:p:128-148
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    27. Philippe Bacchetta & Eric van Wincoop, 2010. "Infrequent Portfolio Decisions: A Solution to the Forward Discount Puzzle," American Economic Review, American Economic Association, vol. 100(3), pages 870-904, June.
    28. Barron, John M. & Ni, Jinlan, 2008. "Endogenous asymmetric information and international equity home bias: The effects of portfolio size and information costs," Journal of International Money and Finance, Elsevier, vol. 27(4), pages 617-635, June.
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