Forward and Spot Exchange Rates” by Fama (1984)Revisited
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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- 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.
- Hodrick, Robert J. & Srivastava, Sanjay, 1986. "The covariation of risk premiums and expected future spot exchange rates," Journal of International Money and Finance, Elsevier, vol. 5(1, Supple), pages S5-S21, March.
- 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.
- Kenneth A. Froot and Jeffrey A. Frankel., 1988. "Forward Discount Bias: Is It an Exchange Risk Premium?," Economics Working Papers 8874, University of California at Berkeley.
- Froot, Kenneth A. & Frankel, Jeffrey A., 1988. "Forward Discount Bias: Is It an Exchange Risk Premium?," Department of Economics, Working Paper Series qt5w65g4zg, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
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