More Evidence on the Dollar Risk Premium in the Foreign Exchange Market

Christian Wolff, Dennis Bams and Kim Walkowiak

No 3726, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: In this article, we develop and estimate an econometric panel data model to capture the common dynamics in dollar risk premia in various forward foreign exchange rates. The common component in the dollar risk premia is highly significant and embodies a common pattern of positive serial correlation (persistence) for the pound, the yen and the mark. Interestingly, our results indicate that the dynamics of the forward prediction error can be attributed almost exclusively to this dollar-related common component. Our evidence also suggests that the three different foreign currencies? dollar risk premia ?respond? to the common factor to different degrees.

Keywords: Forward exchange; Risk (search for similar items in EconPapers)
JEL-codes: F31 G15 (search for similar items in EconPapers)
Date: 2003-01
New Economics Papers: this item is included in nep-fin, nep-fmk, nep-ifn and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://cepr.org/publications/DP3726 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: More evidence on the dollar risk premium in the foreign exchange market (2004)
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: https://EconPapers.repec.org/RePEc:cpr:ceprdp:3726

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP3726

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().