Nonlinearity as an explanation of the forward exchange rate anomaly

Author(s)
Uri
Date Issued
January 2008
Date Available
22T14:17:54Z July 2009
Abstract
This paper shows that nonlinearity can provide an explanation for the forward exchange rate anomaly (Fama, 1984). Using sterling-Canadian dollar data, and modelling nonlinearity of unspecified form by means of a random field, we find strong evidence of time-wise nonlinearity and, significantly, obtain parameter estimates that conform with theory to a high degree of precision: the anomaly disappears.
Type of Material
Working Paper
Publisher
University College Dublin. School of Economics
Series
UCD Centre for Economic Research Working Paper Series
WP08/01
Keywords
Classification
C22
F31
Subject – LCSH
Foreign exchange
Nonlinear theories
Random fields
Web versions
Language
English
Status of Item
Not peer reviewed
This item is made available under a Creative Commons License
File(s)
No Thumbnail Available
Name

WP08.01.pdf

Size

137.7 KB

Format

Download
Owning collection
Economics Working Papers & Policy Papers