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| Author: | Nucci, F. |
| Title: | Cross-currency, cross-maturity forward exchange premiums as predictors of spot rate changes: Theory and evidence |
| Journal: | Journal of Banking and Finance
2003 : FEB, VOL 27:2, p. 183-200 |
| Index terms: | Stock markets Exchange rates Risk Theories Models |
| Language: | eng |
| Abstract: | This paper shows that, in predicting the spot rate of a currency, the term structures of forward premiums of other currencies have incremental information content in addition to the term structure of the currency's own forward premiums. The theoretical model motivating the analysis hinges on the abundant evidence on the co-movements of excess returns from investing in different currencies. The empirical results are obtained through FIML estimation of a vector error correction model for weekly data on three bilateral US dollar exchange rates. |
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