Properties of foreign exchange risk premiums

• 成果类型: Article
• 署名作者: Sarno, Lucio; Schneider, Paul; Wagner, Christian
• 署名单位: City St Georges, University of London; Centre for Economic Policy Research - UK; University of Warwick; Vienna University of Economics & Business
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2012.01.005
• 发表日期: 2012
• 页码: 279-310
• 关键词: term structure; Exchange rates; Forward bias; predictability

摘要

We study the properties of foreign exchange risk premiums that can explain the forward bias puzzle, defined as the tendency of high-interest rate currencies to appreciate rather than depreciate. These risk premiums arise endogenously from the no-arbitrage condition relating the term structure of interest rates and exchange rates. Estimating affine (multi-currency) term structure models reveals a noticeable tradeoff between matching depreciation rates and accuracy in pricing bonds. Risk premiums implied by our global affine model generate unbiased predictions for currency excess returns and are closely related to global risk aversion, the business cycle, and traditional exchange rate fundamentals. (C) 2012 Elsevier B.V. All rights reserved.