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Does data frequency matter for the impact of forward premium on spot exchange rate?

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  • Narayan, Paresh Kumar
  • Sharma, Susan Sunila

Abstract

In this paper we take the forward premium and exchange rate literature forward by asking whether data frequency matters in that relationship. We use four frequencies of data, namely, quarterly, monthly, weekly and daily. We find that data frequencies matter both statistically and economically. More specifically, we document that investors prefer the forward premium model over a constant returns model in most countries when models are estimated using daily, weekly, and quarterly data, but not when using monthly data.

Suggested Citation

  • Narayan, Paresh Kumar & Sharma, Susan Sunila, 2015. "Does data frequency matter for the impact of forward premium on spot exchange rate?," International Review of Financial Analysis, Elsevier, vol. 39(C), pages 45-53.
    • Handle: RePEc:eee:finana:v:39:y:2015:i:c:p:45-53
    DOI: 10.1016/j.irfa.2015.01.011
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    More about this item

    Keywords

    Exchange rate; Forward premium; Data frequency; Investors;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C80 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - General
    • G1 - Financial Economics - - General Financial Markets

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