Pippenger's CIP-based solution to the forward-bias puzzle: A rejoinder

Alan King

Journal of International Financial Markets, Institutions and Money, 2011, vol. 21, issue 5, 867-873

Abstract: Pippenger (2011a) proposed a solution to the longstanding forward-bias puzzle that attracted several comments, to which he has recently replied (Pippenger, 2011b). In this rejoinder it is argued that the points Pippenger raises in defence of his solution do not effectively rebut the concerns originally raised. In addition, his model is found to generate puzzling regression results when applied to real-world data. It is shown that these results arise because his model's coefficients represent (potentially biased) estimates of the covered interest parity equation's coefficients.

Keywords: Forward-bias puzzle; Covered interest parity; Efficient markets hypothesis (search for similar items in EconPapers)
JEL-codes: E44 F31 G14 G15 (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:21:y:2011:i:5:p:867-873

DOI: 10.1016/j.intfin.2011.09.003

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