Economics at your fingertips  

The Time Variation of Risk and Return in Foreign Exchange Markets: A General Equilibrium Perspective

Geert Bekaert ()

Review of Financial Studies, 1996, vol. 9, issue 2, 427-70

Abstract: This article successively introduces variable velocity, durability, and habit persistence in a standard two-country general equilibrium model and explores their effects on the variability of exchange rate changes, forward premiums, and the foreign exchange risk premium. A new feature of the model is that agents make decisions at a weekly frequency and face conditionally heteroskedastic shocks. Nevertheless, even the most complex model fails to deliver sufficiently variable risk premiums without causing forward premiums and exchange rates to be excessively variable. Unlike previous models, the model can roughly match the persistence of forward premiums. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

Date: 1996
References: Add references at CitEc
Citations View citations in EconPapers (81) Track citations by RSS feed

Downloads: (external link) full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See for details.

Related works:
Working Paper: The Time Variation of Risk and Return in Foreign Exchange Markets: A General Equilibrium Perspective (1994) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from

Access Statistics for this article

Review of Financial Studies is currently edited by Maureen O'Hara

More articles in Review of Financial Studies from Society for Financial Studies Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.. Contact information at EDIRC.
Series data maintained by Oxford University Press ().

Page updated 2017-11-07
Handle: RePEc:oup:rfinst:v:9:y:1996:i:2:p:427-70