| Author: | Bansal, R. Dahlquist, M. |
| Title: | The forward premium puzzle: Different tales from developed and emerging economies |
| Journal: | Journal of International Economics
2000 : JUN, VOL. 51:1, p. 115-144 |
| Index terms: | Risk Regression analysis Time series Economic theory Models |
| Language: | eng |
| Abstract: | This paper documents new results regarding the forward premium puzzle. This study is confined to developed economies, and only to states where the U.S. interest rate exceeds foreign interest rates. It is found that differences across economies are systematically related to per capita GNP, average inflation rates and inflation volatility. The empirical work suggests that it is hard to justify the cross-sectional differences in the risk premia as compensation for systematic risk. Instead, country-specific attributes seem to be important in characterizing the cross-sectional dispersion in the risk premia. |
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