Post-EMS exchange risk trends: A comparative perspective between Euro, British Pound and Japanese Yen excess returns against US Dollar

Santana-Jiménez, Yolanda and Pérez-Rodríguez, Jorge V.
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Santana-Jiménez, Yolanda: Universidad de Las Palmas de Gran Canaria
Pérez-Rodríguez, Jorge V.: Universidad de Las Palmas de Gran Canaria

No 07-06, Working Papers from Spanish Chapter of the International Economics and Finance Society

Abstract: This paper studies the exchange rate risk of Euro, Pound and Yen against US Dollar before and after the EMU. The key question is to analyse the impact of the Euro to exchange rate risks. The risk is measured by estimating risk price coefficient (RPC) from an excess return equation. A conditional heteroskedastic variance model with time-varying mean is estimated for this purpose. Recursive estimates are used to examine the evolution of the parameters and to find out time-varying risk premia. Results show that after a period of adaptation following the introduction of the Euro, the Euro/US Dollar RPC decreased.

Keywords: Exchange rate risk; GARCH-M; risk-price; times series; recursive estimation (search for similar items in EconPapers)
JEL-codes: G15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-eec, nep-fmk, nep-ifn and nep-rmg
Date: 2007-10

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Persistent link: http://EconPapers.repec.org/RePEc:aee:wpaper:0706

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