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Nonlinearity as an explanation of the forward exchange rate anomaly
Date Issued
2008-01
Date Available
2009-07-22T14:17:54Z
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.
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
Classification
C22
F31
Subject – LCSH
Foreign exchange
Nonlinear theories
Random fields
Language
English
Status of Item
Not peer reviewed
This item is made available under a Creative Commons License
File(s)
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Name
WP08.01.pdf
Size
137.7 KB
Format
Adobe PDF
Checksum (MD5)
1f1613b53e821b9313a0abfdff34c407
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