Risk aversion, exchange-rate uncertainty, and the law of one price: insights from the market for online air-travel tickets
Michael Arghyrou (),
Andros Gregoriou and
Panayiotis Pourpourides ()
Canadian Journal of Economics, 2011, vol. 44, issue 3, 880-906
We argue that risk aversion driven by exchange-rate uncertainty causes a wedge between the domestic and foreign prices of a homogeneous good. We test our hypothesis using a unique micro-data set from a market with minimum imperfections. The empirical findings validate our hypothesis, as accounting for exchange-rate uncertainty we are able to explain a significant proportion of deviations from the law of one price. Overall, our analysis suggests the possibility of a new solution to the purchasing power parity puzzles.
JEL-codes: F31 F41 (search for similar items in EconPapers)
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
access restricted to subscribers
Journal Article: Risk aversion, exchange‐rate uncertainty, and the law of one price: insights from the market for online air‐travel tickets (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cje:issued:v:44:y:2011:i:3:p:880-906
Ordering information: This journal article can be ordered from
https://www.economic ... ionen/membership.php
Access Statistics for this article
Canadian Journal of Economics is currently edited by Katherine Cuff
More articles in Canadian Journal of Economics from Canadian Economics Association Canadian Economics Association Prof. Werrner Antweiler, Treasurer UBC Sauder School of Business 2053 Main Mall Vancouver, BC, V6T 1Z2. Contact information at EDIRC.
Bibliographic data for series maintained by Prof. Werner Antweiler ().