Asymmetries in the sport-forward G10 exchange rates: an answer to an old puzzle?

George Christodoulakis () and Emmanuel Mamatzakis
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George Christodoulakis: Manchester Business School, University of Manchester, http://www.mbs.ac.uk/

Discussion Paper Series from Department of Economics, University of Macedonia

Abstract: This paper provides evidence on the existence of asymmetries in the underlying loss preferences for the difference between the spot and forward nominal exchange rate. We find that, in the context of both linear and non-linear loss functions, the underlying loss preferences for monthly data are predominantly asymmetric, whilst for weekly exchange rates asymmetry tends to weaken. In a second stage we run cross section regressions to examine what variables drive this asymmetry. Interestingly, besides some macroeconomic variables, such as the growth rate and price changes, political and security risk assert some significant impact on asymmetry.

Keywords: Asymmetric preferences; Spot-forward exchange rates; GMM estimation; Lin-Lin. (search for similar items in EconPapers)
JEL-codes: C53 E27 E37 (search for similar items in EconPapers)
Date: 2008-09, Revised 2008-09
New Economics Papers: this item is included in nep-ifn and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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