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Parity conditions and the efficiency of the Australian 90- and 180-day forward markets
Citation
Felmingham, BS and Leong, SS, Parity conditions and the efficiency of the Australian 90- and 180-day forward markets, Review of Financial Economics, 14, (1) pp. 127-145. ISSN 1058-3300 (2005) [Refereed Article]
DOI: doi:10.1016/j.rfe.2004.08.003
Abstract
Covered Interest Parity (CIP) holds in the 90 and 180 forward market for the AUD/USD spot exchange rate provided fully modified least absolute deviation model (FM-LAD) procedures are applied to daily data for the period from December 2, 1985 to December 29, 2000. CIP fails if corrected ordinary least squares (OLS) and fully modified OLS (FM-OLS) procedures are applied. However, UIP fails in both markets on early data: December 2, 1985 to December 31, 1991, but holds in the 90-day market in a later subperiod: January 2, 1992 to December 29, 2000 FM. UIP is modified (M) to accommodate a potential risk premium. The MUIP model does not provide strong evidence suggesting the presence of a time-varying risk premium (TRP).
Item Details
| Item Type: | Refereed Article |
|---|---|
| Research Division: | Economics |
| Research Group: | Applied Economics |
| Research Field: | International Economics and International Finance |
| Objective Division: | Economic Framework |
| Objective Group: | Macroeconomics |
| Objective Field: | Balance of Payments |
| Author: | Felmingham, BS (Dr Bruce Felmingham) |
| Author: | Leong, SS (Miss Su Leong) |
| ID Code: | 38632 |
| Year Published: | 2005 |
| Deposited By: | Economics and Finance |
| Deposited On: | 2005-08-01 |
| Last Modified: | 2010-06-18 |
| Downloads: | 0 |
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