eCite Digital Repository

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

Repository Staff Only: item control page