Exchange risk premia in the European monetary system

Frederick Nieuwland, Willem Verschoor and Christian Wolff

Applied Financial Economics, 2000, vol. 10, issue 4, 351-360

Abstract: In this article, a survey database of exchange rate expectations is employed to examine EMS exchange risk premia. We are able to test a risk premium model directly, i.e. without having to rely on the rational expectations assumption. The results indicate that time-varying risk premia are almost always present and that a (G)ARCH-in-mean specification is often quite succesful in capturing the essential features of the premia.

Date: 2000
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DOI: 10.1080/09603100050031471

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