Predicting exchange rate returns

Narayan, Paresh, Sharma, Susan, Phan, Dinh and Liu, G 2020, Predicting exchange rate returns, Emerging Markets Review, pp. 1-16, doi: 10.1016/j.ememar.2019.100668.

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Title Predicting exchange rate returns
Author(s) Narayan, PareshORCID iD for Narayan, Paresh
Sharma, SusanORCID iD for Sharma, Susan
Phan, Dinh
Liu, G
Journal name Emerging Markets Review
Article ID 100668
Start page 1
End page 16
Total pages 16
Publisher Elsevier
Place of publication Amsterdam, The Netherlands
Publication date 2020-01-01
ISSN 1566-0141
Keyword(s) Exchange rate
Forward premium
Summary © 2019 We test whether forward premiums predict spot exchange rate returns for 16 currencies. We apply a recently developed time series predictability test that allows us to model data features including heteroskedasticity in forward premium. We discover return predictability for 75% (12/16) of currencies in our sample. Trading strategies show that investors can make more profits from our proposed forward premium model compared to a random walk model and foreign exchange carry trade model.
Notes In Press
Language eng
DOI 10.1016/j.ememar.2019.100668
Field of Research 1402 Applied Economics
HERDC Research category C1 Refereed article in a scholarly journal
ERA Research output type C Journal article
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Document type: Journal Article
Collections: Faculty of Business and Law
Deakin Business School
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