The forward premium anomaly is not as bad as you think

  • Richard T. Bailliea, Tim Bollerslevb
The forward premium anomaly refers to the widespread empirical finding that the slope coefficient in the regression of the change in the logarithm of the spot exchange rate on the forward premium is invariably less than unity, and often negative. This “anomaly” implies the apparent predictability of excess returns over uncovered interest rate parity (UIP… CONTINUE READING

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