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Can signal extraction help predict risk premia in foreign exchange rates

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  • Kiani, Khurshid M.

Abstract

The present study investigates possible existence of time varying risk premia in Brazilian real, Chinese yuan; Cypriot pound, Danish krone, Eurozone euro, French franc, Indian rupee, Japanese yen, Pakistani rupee, and British pound forward foreign exchange rates against US dollar. Exchange rates in these series are modeled using non-Gaussian state space models that encompass non-normality and GARCH-like affects.

Suggested Citation

  • Kiani, Khurshid M., 2013. "Can signal extraction help predict risk premia in foreign exchange rates," Economic Modelling, Elsevier, vol. 33(C), pages 926-939.
    • Handle: RePEc:eee:ecmode:v:33:y:2013:i:c:p:926-939
    DOI: 10.1016/j.econmod.2013.06.005
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    Cited by:

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    2. Coelho dos Santos, Marcelo Bittencourt & Klotzle, Marcelo Cabus & Figueiredo Pinto, Antonio Carlos, 2016. "Evidence of risk premiums in emerging market carry trade currencies," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 44(C), pages 103-115.
    3. Kumar, Satish, 2019. "Does risk premium help uncover the uncovered interest parity failure?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 63(C).

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    More about this item

    Keywords

    Forward foreign exchange rates; Non-normality; Risk premium; Spot foreign exchange rates; State space model; Volatility persistence;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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