EconPapers    
Economics at your fingertips  
 

The dynamics of ex-ante risk premia in the foreign exchange market: evidence from the yen/usd exchange rate using survey data

Georges Prat () and Remzi Uctum ()

Post-Print from HAL

Abstract: Using financial experts' Yen/USD exchange rate expectations provided by Consensus Forecasts surveys, this paper aims to model the 3 and 12-month ahead ex-ante risk premia, measured as the difference between the expected and forward exchange rates. The condition of predictability of returns implies that the variance of the rate of change in exchange rate is horizon-dependent and this is a sufficient condition for agents not to require at any time a risk premium but a set of premia scaled by the time horizon of the investment. Moreover, using a two-step portfolio decision making process framework, we show that each premium depends on the net market position related to the maturity of the asset considered. Since the time-varying real net market positions are unobservable, they have been estimated through a state space model using the Kalman filter methodology. We find that a two-country portfolio asset pricing model explains satisfactorily both the common and the specific time-patterns of the 3- and 12-month ex-ante premia.

Keywords: Risk premium; foreign exchange market (search for similar items in EconPapers)
Date: 2007-06
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00173109
References: Add references at CitEc
Citations: Track citations by RSS feed

Published in Global Finance Conference, Jun 2007, Dublin, Ireland

Downloads: (external link)
https://halshs.archives-ouvertes.fr/halshs-00173109/document (application/pdf)

Related works:
Working Paper: The dynamics of ex-ante risk premia in the foreign exchange market: Evidence from the yen/usd exchange rate Using survey data (2008) 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:hal:journl:halshs-00173109

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().

 
Page updated 2021-07-08
Handle: RePEc:hal:journl:halshs-00173109