Forward interest rate premium and asymmetric adjustment: Evidence from 16 countries |
| |
| Authors: | David G McMillan |
| |
| Institution: | 1. Department of Banking and Finance, National Chi Nan University, Taiwan, ROC;2. Department of Marketing Management, Takming University of Science and Technology, Taiwan, ROC;1. School of Information Engineering, Nanchang Hangkong University, Nanchang, 330063, China;2. School of Information Engineering, Ningbo Dahongying University, Ningbo, 315175, China;3. School of Finance and Coordinated Innovation Center of Wealth Management and Quantitative Investment, Zhejiang University of Finance and Economics, Hangzhou, 310018, China;4. School of Economics and Management, Tsinghua University, Beijing, 100084, China |
| |
| Abstract: | This paper examines the ability of the forward premium to provide an unbiased estimate of the future spot rate allowing for potential asymmetries. Extant evidence suggests that forward rates provide a biased predictor of future spot rates. Examining the forward premium for 16 countries, only for 2 countries does the linear expectations hypothesis holds. For the remaining countries, results generally support the view that the larger the forward premium the better a predictor for future spot rates it is, however, this result is not unique across all countries. Furthermore, although the asymmetric model improves data fit over the linear model, only in four cases does the model support an unbiased predictor interpretation. Further research is therefore required to understand the nature of this relationship, not least given the importance of correctly priced forward and long rates in terms of expected returns to future investments and the conduct of monetary policy. |
| |
| Keywords: | |
| 本文献已被 ScienceDirect 等数据库收录！ |
|
