EconPapers    
Economics at your fingertips  
 

The Forward Premium Puzzle and Latent Factors Day by Day

Kerstin Bernoth (), Casper de Vries () and Juergen von Hagen ()

No 7772, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We use futures instead of forward rates to study the complete maturity spectrum of the forward premium puzzle from two days to six months. At short maturities, the slope coefficient is positive, but it turns negative as the maturity increases to the monthly level. Futures data allow us to control for the influence of an unobserved factor that can be decomposed into a contract-specific and a time-to-maturity effect. Once we do this, we find that the coefficients on the forward premium are much closer to one. The latent factor is shown to be related to conventional proxies of risk.

Keywords: forward premium puzzle; futures rates; latent factor (search for similar items in EconPapers)
JEL-codes: F31 F37 G13 (search for similar items in EconPapers)
Date: 2010-04
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=7772 (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:
Working Paper: The forward premium puzzle and latent factors day by day (2012) Downloads
Working Paper: The Forward Premium Puzzle and Latent Factors Day by Day (2010) Downloads
Working Paper: The Forward Premium Puzzle and Latent Factors Day by Day (2010) 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: https://EconPapers.repec.org/RePEc:cpr:ceprdp:7772

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=7772

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 ().

 
Page updated 2022-05-17
Handle: RePEc:cpr:ceprdp:7772