Time-varying Risk Premium in the Foreign Exchange Market
Title | Time-varying Risk Premium in the Foreign Exchange Market PDF eBook |
Author | Pamela H. Chang |
Publisher | |
Pages | 33 |
Release | 1992 |
Genre | |
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Can a Time Varying Risk Premium Explain the Failure of Uncovered Interest Party in the Market for Foreign Exchange
Title | Can a Time Varying Risk Premium Explain the Failure of Uncovered Interest Party in the Market for Foreign Exchange PDF eBook |
Author | Hopper |
Publisher | |
Pages | 53 |
Release | 1992 |
Genre | Foreign exchange |
ISBN |
On Time-Series Properties of Time-Varying Risk Premium in the Yen/Dollar Exchange Market
Title | On Time-Series Properties of Time-Varying Risk Premium in the Yen/Dollar Exchange Market PDF eBook |
Author | Fabio Canova |
Publisher | |
Pages | 32 |
Release | 2008 |
Genre | |
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The purpose of this paper is to characterize the changes in risk premium in the 1980s. A five-variable vector autoregressive model (VAR) is constructed to calculate a risk premium series in the foreign exchange market. The risk premium series is volatile and time-varying. The hypothesis of no risk premium is strongly rejected for the entire sample and each of the two subsamples considered. Various tests using the constructed risk premium series suggest that a risk premium existed but it was neither constant nor stable over subsamples and that its volatility was considerably reduced after October 1982.
Time-Varying Risk Premia in Foreign Exchange and Equity Markets
Title | Time-Varying Risk Premia in Foreign Exchange and Equity Markets PDF eBook |
Author | Chu-Sheng Tai |
Publisher | |
Pages | |
Release | 2000 |
Genre | |
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One of the puzzles in international finance literature is the deviations from Uncovered Interest Parity (UIP). In this paper, I further examine the validity of the risk premia hypothesis in explaining this puzzle by testing a conditional international CAPM (ICAPM) in the absence of Purchasing Power Parity (PPP) using data from both foreign exchange and equity markets in Asia-Pacific countries. When considering foreign exchange markets only, I find that conditional variances are not related to the deviations from UIP in any statistical sense based on an univariate GARCH(1,1)-M model. However, as I consider both foreign exchange and equity markets together and test the conditional ICAPM in the absence of PPP, I can not reject the model based on the J-test by Hansen (Econometrica 50 (1982), 1029-1054), and find significant time-varying market and foreign exchange risk premia presented in the data. This empirical evidence supports the notion of time-varying risk premia in explaining the deviations from UIP. It also supports the idea that the foreign exchange risk is not diversifiable and hence should be priced in both markets.Key Words: International asset pricing, Uncovered interest parity, Time-varying risk premium, GARCH, GMM.
More Evidence on the Dollar Risk Premium in the Foreign Exchange Market
Title | More Evidence on the Dollar Risk Premium in the Foreign Exchange Market PDF eBook |
Author | Dennis Bams |
Publisher | |
Pages | 42 |
Release | 2003 |
Genre | Dollar, American |
ISBN |
Time-varying Risk Premia in Forward Foreign Exchange Markets and Conditional Heteroskedasticity
Title | Time-varying Risk Premia in Forward Foreign Exchange Markets and Conditional Heteroskedasticity PDF eBook |
Author | William Dean Lastrapes |
Publisher | |
Pages | 208 |
Release | 1986 |
Genre | |
ISBN |
Time-varying Risk Premia and the Efficiency of the New Zealand Foreign Exchange Market
Title | Time-varying Risk Premia and the Efficiency of the New Zealand Foreign Exchange Market PDF eBook |
Author | Dimitris Margaritis |
Publisher | |
Pages | 20 |
Release | 1991 |
Genre | Foreign exchange futures |
ISBN |