IDEAS home Printed from https://ideas.repec.org/a/bla/obuest/v56y1994i2p189-208.html
   My bibliography  Save this article

Testing for the Presence of Time-Varying Risk Premium Using a Mean-Conditional-Variance Optimization Model

Author

Listed:
  • Ngama, Yerima Lawan

Abstract

This paper develops a version of the mean-variance optimization model that yields three equilibrium conditions: covered interest parity (CIP), forward rate unbiasedness (FU) and uncovered interest rate parity (UIP). The last two hold in the standard fashion only when agents are risk neutral. The exchange risk premium depends on the conditional variance of the future spot exchange rate. This is generated by a GARCH (1.1) Model. Using the Phillips and Hansen (1990) estimation and inference procedures, we find that CIP holds, while the UIP and FU can be rejected only for the Japanese yen. Evidence of the presence of time varying risk premia is found in the Deutschemark and the Japanese yen. All the variables for the three relationships are found to be cointegrated. Copyright 1994 by Blackwell Publishing Ltd

Suggested Citation

  • Ngama, Yerima Lawan, 1994. "Testing for the Presence of Time-Varying Risk Premium Using a Mean-Conditional-Variance Optimization Model," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 56(2), pages 189-208, May.
    • Handle: RePEc:bla:obuest:v:56:y:1994:i:2:p:189-208
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. So, Raymond W., 2001. "Price and volatility spillovers between interest rate and exchange value of the US dollar," Global Finance Journal, Elsevier, vol. 12(1), pages 95-107.
    2. Shu-Mei Chiang & Chi-Tai Lin & Chien-Ming Huang, 2013. "The Relationships Among Stocks, Bonds and Gold: Safe Haven, Hedge or Neither?," Diversity, Technology, and Innovation for Operational Competitiveness: Proceedings of the 2013 International Conference on Technology Innovation and Industrial Management,, ToKnowPress.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:obuest:v:56:y:1994:i:2:p:189-208. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/sfeixuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.