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Does data frequency matter for the impact of forward premium on spot exchange rate?

journal contribution
posted on 01.05.2015, 00:00 authored by Paresh Narayan, Susan SharmaSusan Sharma
In this paper we take the forward premium and exchange rate literature forward by asking whether data frequency matters in that relationship. We use four frequencies of data, namely, quarterly, monthly, weekly and daily. We find that data frequencies matter both statistically and economically. More specifically, we document that investors prefer the forward premium model over a constant returns model in most countries when models are estimated using daily, weekly, and quarterly data, but not when using monthly data.

History

Journal

International Review of Financial Analysis

Volume

39

Pagination

45 - 53

Publisher

Elsevier Inc.

ISSN

1057-5219

Language

eng

Publication classification

C Journal article; C1 Refereed article in a scholarly journal

Copyright notice

2015, Elsevier