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The Forward Premium Puzzle Across Maturities

Author

Listed:
  • Liang Ding

    (Macalester College)

  • Linh To

    (Convexity Capital Management LP)

Abstract

This paper tests the forward premium puzzle in a wide range of maturities from 1-day to 5-year. It finds that the forward premium puzzle appears to be most significant for medium maturities, while disappearing for both very short and long maturities.

Suggested Citation

  • Liang Ding & Linh To, 2010. "The Forward Premium Puzzle Across Maturities," Economics Bulletin, AccessEcon, vol. 30(2), pages 1113-1119.
    • Handle: RePEc:ebl:ecbull:eb-10-00064
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2010/Volume30/EB-10-V30-I2-P104.pdf
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    References listed on IDEAS

    as
    1. Menzie D. Chinn & Guy Meredith, 2004. "Monetary Policy and Long-Horizon Uncovered Interest Parity," IMF Staff Papers, Palgrave Macmillan, vol. 51(3), pages 409-430, November.
    2. Menzie D. Chinn & Guy Meredith, 2005. "Testing Uncovered Interest Parity at Short and Long Horizons during the Post-Bretton Woods Era," NBER Working Papers 11077, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Kerstin Bernoth & Jürgen von Hagen & Casper G. de Vries, 2010. "The Forward Premium Puzzle and Latent Factors Day by Day," Discussion Papers of DIW Berlin 989, DIW Berlin, German Institute for Economic Research.
    2. Kerstin Bernoth & Jürgen von Hagen & Casper G. de Vries, 2018. "Estimating a Latent Risk Premium in Exchange Rate Futures," Discussion Papers of DIW Berlin 1733, DIW Berlin, German Institute for Economic Research.

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    More about this item

    Keywords

    forward premium puzzle; maturity; GMM;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • G1 - Financial Economics - - General Financial Markets

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