Measuring the risk premium in uncovered interest parity using the component GARCH-M model
Reference:
Li, D., Ghoshray, A. and Morley, B., 2012. Measuring the risk premium in uncovered interest parity using the component GARCH-M model. International Review of Economics & Finance, 24, pp. 167-176.
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Official URL:
http://dx.doi.org/10.1016/j.iref.2012.02.001
Abstract
The aim of this study is to analyze the potential risk premium inherent in the uncovered interest parity (UIP) condition. The component GARCH-in-mean model is used to measure the time-varying risk premium in UIP and separates the permanent and transitory risk. The results show that the risk premium is significant in most countries studied in this analysis. This suggests that risk is an important part of modeling exchange rates and needs to be considered in both empirical and theoretical models. In general, the results suggest emerging countries work better in terms of UIP and the risk premium than developed countries.
Details
| Item Type | Articles |
| Creators | Li, D., Ghoshray, A. and Morley, B. |
| DOI | 10.1016/j.iref.2012.02.001 |
| Departments | Faculty of Humanities & Social Sciences > Economics |
| Publisher Statement | Morley_IREF_2012.pdf: NOTICE: this is the author’s version of a work that was accepted for publication in International Review of Economics & Finance. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in International Review of Economics & Finance, vol 24, 2012, DOI 10.1016/j.iref.2012.02.001; Morley_IREF_2012.doc: NOTICE: this is the author’s version of a work that was accepted for publication in International Review of Economics & Finance. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in International Review of Economics & Finance, vol 24, 2012, DOI 10.1016/j.iref.2012.02.001 |
| Refereed | Yes |
| Status | Published |
| ID Code | 28788 |
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