ASYMMETRY IN FORWARD EXCHANGE-RATE BIAS - A PUZZLING RESULT

Authors
WU YR ZHANG H
Citation
Yr. Wu et H. Zhang, ASYMMETRY IN FORWARD EXCHANGE-RATE BIAS - A PUZZLING RESULT, Economics letters, 50(3), 1996, pp. 407-411
Citations number
9
Categorie Soggetti
Economics
Journal title
Economics letters → ACNP
ISSN journal
01651765
Volume
50
Issue
3
Year of publication
1996
Pages
407 - 411
Database
ISI
SICI code
0165-1765(1996)50:3<407:AIFEB->2.0.ZU;2-H
Abstract
In this paper we document that the hypothesis that the forward exchang e rate discount is an unbiased predictor of future currency depreciati on holds in periods when the forward US dollar is quoted at a premium against the Japanese yen and the Deutschmark, but fails when it is quo ted at a discount for the post-Bretton Woods floating exchange rate er a. Moreover, the observed asymmetry is statistically significant. This puzzling result remains to be explained.