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Forward and Spot Exchange Rates” by Fama (1984)Revisited

  • Ulugbek Olimov

    (Center for Economic Research)

The main objective of this paper is to review and to replicate the paper 'Forward and Spot Exchange Rates' by Fama (1984). I used non-overlapping monthly data for three major currencies, and divided the sample into two, the 'replication' and the 'extension' periods. The results of this replication paper once more confirmed the conclusions of Fama (1984). After reviewing some post-Fama (1984) empirical studies in this topic, two main conclusions are drawn: (1) there is a general agreement that both components of forward rates vary through time; and (2) there is less agreement that the variance of the premium component is large relative to the variance of the expected depreciation of the spot rate.

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File URL: http://128.118.178.162/eps/if/papers/0508/0508012.pdf
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Paper provided by EconWPA in its series International Finance with number 0508012.

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Length: 10 pages
Date of creation: 30 Aug 2005
Date of revision:
Handle: RePEc:wpa:wuwpif:0508012
Note: Type of Document - pdf; pages: 10
Contact details of provider: Web page: http://128.118.178.162

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  1. Robert J. Hodrick & Sanjay Srivastava, 1985. "The Covariation of Risk Premiums and Expected Future Spot Exchange Rates," NBER Working Papers 1749, National Bureau of Economic Research, Inc.
  2. Froot, Kenneth A & Frankel, Jeffrey A, 1989. "Forward Discount Bias: Is It an Exchange Risk Premium?," The Quarterly Journal of Economics, MIT Press, vol. 104(1), pages 139-61, February.
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