Nonlinearity as an explanation of the forward exchange rate anomaly
|Title:||Nonlinearity as an explanation of the forward exchange rate anomaly||Authors:||Bond, D. (Derek)
Harrison, Michael J.
O'Brien, Edward J. (Edward Joseph)
|Permanent link:||http://hdl.handle.net/10197/1272||Date:||Jan-2008||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||Keywords:||Forward exchange rate anomaly;Nonlinearity;Random field regression||Subject LCSH:||Foreign exchange
|Language:||en||Status of Item:||Not peer reviewed|
|Appears in Collections:||Economics Working Papers & Policy Papers|
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