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

Ulugbek Olimov ()

International Finance from EconWPA

Abstract: 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.

Keywords: Forward; and; spot; exchange; rates (search for similar items in EconPapers)
JEL-codes: F3 F4 (search for similar items in EconPapers)
Date: 2005-08-30
Note: Type of Document - pdf; pages: 10
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpif:0508012

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