Testing the Persistence of the Forward Premium: Structural Changes or Misspecification?

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• 作者：Tsung-Wu Ho ; Wan-Shin Mo
• 关键词：Forward premium puzzle ; Unit roots with structural changes ; Predictability ; Forward rate unbiasedness hypothesis ; Persistence ; F31 ; E43 ; G10
• 刊名：Open Economies Review
• 出版年：2016
• 出版时间：February 2016
• 年：2016
• 卷：27
• 期：1
• 页码：119-138
• 全文大小：398 KB
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• 作者单位：Tsung-Wu Ho (1)
  Wan-Shin Mo (2)
  
  1. Department of Finance, Shih Hsin University, No. 1, Lane 17, Section 1, Mu-Cha Road, 11602, Taipei, Republic of China
  2. Department of Finance, Chung Yuan Christian University, 200, Chung Pei Road, 32020, Chung Li, Republic of China
  
• 刊物类别：Business and Economics
• 刊物主题：Economics
  International Economics
  Development Economics
  
• 出版者：Springer Netherlands
• ISSN：1573-708X

文摘

This study investigates whether the ignored structural break causes the forward premium non-stationary. This paper proposes to test for the presence of unit root with multiple structural breaks. We find that, as long as the dynamic lag structure is specified, the forward premium exhibits a non-stationary process even if structural breaks are accounted for and points to no evidence of moving toward stationarity. Given our findings, the structural change model seems less robust in explaining the forward premium puzzle. Keywords Forward premium puzzle Unit roots with structural changes Predictability Forward rate unbiasedness hypothesis Persistence