Download or read book On the Biasedness of Forward Foreign Exchange Rates written by Stefano Cavaglia and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this article we reconsider the Froot and Frankel (1989) results on the sources of forward discount bias. We question the economic validity of some estimation restrictions which they impose and, thus, are led to question some of their results. We employ a new exchange rate survey database that includes EMS currencies and use univariate and pooling estimation techniques that impose fewer restrictions than those of Froot and Frankel to test our hypotheses. We find that the bias in the forward discount is attributale to both the failure of rational expectations and the existence of time-varying risk premia.

Download or read book On the Biasedness of Forward Foreign Exchange Rates Irrationality Or Risk Premia Working Paper written by S. Cavaglia and published by . This book was released on 1991 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book On Biases in the Measurement of Foreign Exchange Risk Premiums written by Geert Bekaert and published by . This book was released on 1993 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Forward Exchange Rate Bias written by Ross Levine and published by . This book was released on 1988 with total page 84 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Realignment Expectations Forward Rate Bias and Sterilized Intervention in an Adjustable Peg Exchange Rate Model with Policy Optimization written by Mr.Peter Isard and published by International Monetary Fund. This book was released on 1994-02-01 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper models an adjustable peg exchange rate arrangement as a policy rule with an escape clause under which the timing and magnitudes of realignments are the outcomes of policy optimization decisions. Under the assumptions that market participants are rational, risk averse, and fully informed about the incentives of policymakers, the analysis focuses on the implications for relating realignment expectations to the state variables that enter the policy objective function, for modeling the bias in using forward exchange rates to predict future spot rates, and for characterizing the effectiveness of sterilized intervention.

Download or read book The Forward Exchange Rate as a Predictor of the Future Spot Rate written by Cheol S. Eun and published by . This book was released on 1998 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Explaining Forward Exchange Bias Intraday written by Richard K. Lyons and published by . This book was released on 1995 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: Intraday interest rates are zero. Consequently, a foreign exchange dealer can short a vulnerable currency in the morning, close this position in the afternoon, and never face an interest cost. This tactic might seem especially attractive in times of crisis, since it suggests an immunity to the central bank's interest rate defense. In equilibrium, however, buyers of the vulnerable currency must be compensated on average with an intraday capital gain as long as no devaluation occurs. That is, currencies under attack should typically appreciate intraday. Using data on intraday exchange rate changes within the EMS, we find this prediction is borne out.

Download or read book On the Biasedness of Forward Foreign Exchange Rates written by Stefano M. F. G. Cavaglia and published by . This book was released on 1993 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Nonlinearity in Deviations from Uncovered Interest Parity An Explanation of the Forward Bias Puzzle written by Lucio Sarno and published by International Monetary Fund. This book was released on 2006-05 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide empirical evidence that deviations from uncovered interest rate parity (UIP) display significant nonlinearities, consistent with theories based on transaction costs or limits to speculation. This evidence suggests that the forward bias documented in the literature may be less indicative of major market inefficiencies than previously thought. Monte Carlo experiments allow us to reconcile these results with the large empirical literature on the forward bias puzzle since we show that, if the true process of UIP deviations were of the nonlinear form we consider, estimation of conventional spot-forward regressions would generate the anomalies documented in previous research.

Download or read book Findings of Forward Discount Bias Interpreted in Light of Exchange Rate Survey Data written by Kenneth Froot and published by Legare Street Press. This book was released on 2023-07-18 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this groundbreaking study, Jeffrey A. Frankel and Kenneth Froot examine the phenomenon of forward discount bias in exchange rates, using survey data to shed light on the behavior of investors and market participants. Their findings have important implications for understanding the dynamics of currency markets. This work has been selected by scholars as being culturally important, and is part of the knowledge base of civilization as we know it. This work is in the "public domain in the United States of America, and possibly other nations. Within the United States, you may freely copy and distribute this work, as no entity (individual or corporate) has a copyright on the body of the work. Scholars believe, and we concur, that this work is important enough to be preserved, reproduced, and made generally available to the public. We appreciate your support of the preservation process, and thank you for being an important part of keeping this knowledge alive and relevant.

Download or read book The Forward Premium Bias Under Different Monetary Policy Environments written by David Steele and published by . This book was released on 1996 with total page 12 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Misspecification Bias in Tests of the Forward Foreign Exchange Rate Unbiasedness Hypothesis written by Janice L. Boucher and published by . This book was released on 1991 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Forecasting Accuracy of Forward Exchange Rates and the Efficiency of the Market for Foreign Exchange written by Erdogan Bilik and published by . This book was released on 1982 with total page 213 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation analyses the following three interrelated issues within an efficient market context. 1. Comparative forecasting accuracy of forward exchange-rates vis-a-vis the spot rate predictions marketed by a number of foreign-exchange forecasting services. 2. The existence of "premiums" imbedded in forward exchange-rates. 2. The existence of "premiums" imbedded in forward exchange-rates. 3. Excess profit opportunities in speculative trading strategies on currency futures contracts based on the "trading-signals" marketed by another group of foreign-exchange forecasting services. Track records of twelve future spot exchange-rate forecasting services and four technical exchange rate trend analyzing services are used to compare their predictive performances with that of forward exchange rates and with currency futures contracts. Seven major currencies vis-a-vis the U.S. Dollar are examined during a period of seven years, from 1974 through 1980. The study reveals the following. 1. Foreign-exchange forecasting services in general do not provide more accurate point estimates of the future spot rates than those provided by the forward rates. 2. Both forward rates and forecasts marketed by those services are found to be biased predictors of the future spot rates implying the existence of "premiums" both in forward rates and in those predictions. The premiums are found to be consistently and significantly positive during the study period. This important finding kelps to eliminate ouch of the ambiguity pertaining to the issue of "forward rate bias" in foreign-exchange literature. 3. The statistical analyses used in the study do not provide support for rejecting the notion of inefficiency in the market for foreign-exchange. Although the findings regarding the market efficiency may be due to the inappropriateness of the market model which was jointly tested with the null hypothesis of "efficiency", they may remain valid until either better statistical techniques or more appropriate equilibrium models are developed.

Download or read book Behavioral Biases in Forward Rates as Forecasts of Future Exchange Rates written by Raj Aggarwal and published by . This book was released on 2016 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: Even though the forward-spot relationship in currency markets is very important for policy makers and for corporate and investment managers, it remains a theoretical and empirical puzzle. In theory the forward rate should be an unbiased forecast of the future spot rate, but this hypothesis has little empirical support. For the currencies of the nine major industrialized countries, this paper documents that in spite of the very high trading volumes in currency markets, consistent with evidence for other asset markets, revisions in the forward rate forecasts of the future spot exchange rate reflect systematic pessimism and under-reaction to new information.

Download or read book The Forward Exchange Rate Bias Puzzle is Persistent written by Raj Aggarwal and published by . This book was released on 2009 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: An important puzzle in international finance is the failure of the forward exchange rate to be a rational forecast of the future spot rate. It has often been suggested that this puzzle may be resolved by using better statistical procedures that correct for both non-stationarity and nonnormality in the data. We document that even after accounting for non-stationarity, nonnormality, and heteroscedasticity using parametric and non-parametric tests on data for over a quarter century, US dollar forward rates for horizons ranging from one to twelve months for the major currencies, the British pound, Japanese yen, Swiss franc, and the German mark, are generally not rational forecasts of future spot rates. These findings of non-rationality in forward exchange rates for the major currencies continue to be puzzling especially as these foreign exchange markets are some of the most liquid asset markets with very low trading costs.

Download or read book The Pricing of Forward Exchange Rates written by Ross Levine and published by . This book was released on 1987 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Explaining Foreign Exchange Market Puzzles written by Mr.Norman C. Miller and published by International Monetary Fund. This book was released on 1999-03-01 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper develops a flow model of the exchange rate with speculative capital flows integrated in a rigorous manner. The model is consistent with five foreign exchange market puzzles: (1) occasional discontinuous jumps in the exchange rate; (2) periodic short-term regimes of persistent appreciation/depreciation that can develop into a long swing; (3) the forward discount bias; (4) volatility clusters in the foreign exchange market that create conditional heteroskedasticity; and (5) the dual profitability of betting in the short run against any official foreign exchange intervention, and betting with the intervention in the long run.