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Risk, Policy Rules, and Noise: Rethinking Deviations from Uncovered Interest Parity

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  • Nelson C. Mark

    (The Ohio State University)

  • Yangru Wu

    (The Ohio State University)

Abstract

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Suggested Citation

  • Nelson C. Mark & Yangru Wu, 1997. "Risk, Policy Rules, and Noise: Rethinking Deviations from Uncovered Interest Parity," Tinbergen Institute Discussion Papers 97-041/2, Tinbergen Institute.
  • Handle: RePEc:tin:wpaper:19970041
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    References listed on IDEAS

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    3. Taylor, Stephen J, 1992. "Rewards Available to Currency Futures Speculators: Compensation for Risk or Evidence of Inefficient Pricing?," The Economic Record, The Economic Society of Australia, vol. 0(0), pages 105-116, Supplemen.
    4. Baillie, Richard T & Bollerslev, Tim, 1989. " Common Stochastic Trends in a System of Exchange Rates," Journal of Finance, American Finance Association, vol. 44(1), pages 167-181, March.
    5. Domowitz, Ian & Hakkio, Craig S., 1985. "Conditional variance and the risk premium in the foreign exchange market," Journal of International Economics, Elsevier, vol. 19(1-2), pages 47-66, August.
    6. McCallum, Bennett T., 1994. "A reconsideration of the uncovered interest parity relationship," Journal of Monetary Economics, Elsevier, vol. 33(1), pages 105-132, February.
    7. Kenneth A. Froot & Jeffrey A. Frankel, 1989. "Forward Discount Bias: Is it an Exchange Risk Premium?," The Quarterly Journal of Economics, Oxford University Press, vol. 104(1), pages 139-161.
    8. Bekaert, Geert, 1994. "Exchange rate volatility and deviations from unbiasedness in a cash-in-advance model," Journal of International Economics, Elsevier, vol. 36(1-2), pages 29-52, February.
    9. Kandel, Shmuel & Stambaugh, Robert F, 1990. "Expectations and Volatility of Consumption and Asset Returns," Review of Financial Studies, Society for Financial Studies, vol. 3(2), pages 207-232.
    10. Hai, Weike & Mark, Nelson C & Wu, Yangru, 1997. "Understanding Spot and Forward Exchange Rate Regressions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(6), pages 715-734, Nov.-Dec..
    11. Backus, David K & Gregory, Allan W & Telmer, Chris I, 1993. "Accounting for Forward Rates in Markets for Foreign Currency," Journal of Finance, American Finance Association, vol. 48(5), pages 1887-1908, December.
    12. Richard H. Clarida & Mark P. Taylor, 1993. "The Term Structure of Forward Exchange Premia and the Forecastibility of Spot Exchange Rates: Correcting the Errors," NBER Working Papers 4442, National Bureau of Economic Research, Inc.
    13. Bekaert, Geert, 1995. "The Time Variation of Expected Returns and Volatility in Foreign-Exchange Markets," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(4), pages 397-408, October.
    14. Canova, Fabio & Ito, Takatoshi, 1991. "The Time-Series Properties of the Risk Premium in the Yen/Dollar Exchange Market," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 6(2), pages 125-142, April-Jun.
    15. Martin D. D. Evans & Karen K. Lewis, 2017. "Trends in Excess Returns in Currency and Bond Markets," World Scientific Book Chapters, in: Studies in Foreign Exchange Economics, chapter 2, pages 39-57, World Scientific Publishing Co. Pte. Ltd..
    16. De Long, J Bradford & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, 1990. "Noise Trader Risk in Financial Markets," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 703-738, August.
    17. Baillie, Richard T & Bollerslev, Tim, 2002. "The Message in Daily Exchange Rates: A Conditional-Variance Tale," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 60-68, January.
    18. Backus, D.K. & Foresi, S. & Telmer, C.I., 1994. "The Forward Premium Anomaly: Three Examples in Serach of Solution," Papers 95-01, Columbia - Graduate School of Business.
    19. Goldberg, Michael D & Frydman, Roman, 1996. "Imperfect Knowledge and Behaviour in the Foreign Exchange Market," Economic Journal, Royal Economic Society, vol. 106(437), pages 869-893, July.
    20. Chen, Jian & Mark, Nelson C, 1996. "Alternative Long-Horizon Exchange-Rate Predictors," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 1(4), pages 229-250, October.
    21. Zietz, Joachim, 1995. "Some Evidence on the Efficiency of the Forward Market for Foreign Exchange from Monte-Carlo Experiments," Economic Journal, Royal Economic Society, vol. 105(433), pages 1471-1487, November.
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    24. Engel, Charles & Hamilton, James D, 1990. "Long Swings in the Dollar: Are They in the Data and Do Markets Know It?," American Economic Review, American Economic Association, vol. 80(4), pages 689-713, September.
    25. Bekaert, Geert & Hodrick, Robert J, 1992. "Characterizing Predictable Components in Excess Returns on Equity and Foreign Exchange Markets," Journal of Finance, American Finance Association, vol. 47(2), pages 467-509, June.
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    28. Engel, Charles M., 1984. "Testing for the absence of expected real profits from forward market speculation," Journal of International Economics, Elsevier, vol. 17(3-4), pages 299-308, November.
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    Cited by:

    1. Park, Cheolbeom & Park, Sookyung, 2017. "Can monetary policy cause the uncovered interest parity puzzle?," Japan and the World Economy, Elsevier, vol. 41(C), pages 34-44.

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