EconPapers    
Economics at your fingertips  
 

On Biases in the Measurement of Foreign Exchange Risk Premiums

Geert Bekaert and Robert Hodrick ()

No 3861, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The hypothesis that the forward rate is an unbiased predictor of the future spot rate has been consistently rejected in recent empirical studies. This paper examines several sources of measurement error and misspecification that might induce biases in such studies. Although previous inferences are shown to be robust to a failure to construct true returns and to omitted variable bias arising from conditional heteroskedasticity in spot rates, we show that the parameters were not stable over the 1975-1989 sample period. Estimation that allows for endogenous regime shifts in the parameters demonstrates that deviations from unbiasedness were more severe in the 1980's.

Date: 1991-10
Note: ITI AP IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published as Journal of International Money and Finance, Vol.12, no.2 (April 1993): 115-138.

Downloads: (external link)
http://www.nber.org/papers/w3861.pdf (application/pdf)

Related works:
Journal Article: On biases in the measurement of foreign exchange risk premiums (1993) 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:nbr:nberwo:3861

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w3861

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2025-03-31
Handle: RePEc:nbr:nberwo:3861