Is it Risk? Explaining Deviations from Uncovered Interest Parity

Robert Cumby ()

No 2380, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper analyzes ex-ante returns to forward speculation and asks if these returns can be explained by models of a foreign exchange risk premium. After presenting evidence that both nominal and real expected speculative profits are non-zero, the paper examines if real returns to forward speculation are consistent with consumption-based models of risk premia. Estimates of the conditional covariance between real speculative returns and real consumption growth are presented and, like ex-ante returns to forward speculation, they exhibit statistically significant fluctuations over time and often change sign.

Date: 1987-09
Note: ITI IFM
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Citations: View citations in EconPapers (2)

Published as Journal of Monetary Economics, Vol. 22, pp. 279-299, September 1988.

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Journal Article: Is it risk?: Explaining deviations from uncovered interest parity (1988)
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