Does the Fed beat the foreign-exchange market?
This paper’s estimates and tests of Fed intervention profits are the first that explicitly adjust for foreign-exchange risk premia; failure to adjust may grossly affect estimated profits. Profits appear economically and statistically significant, whether risk premia are modeled as time-constant or a...
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Veröffentlicht in: | Journal of banking & finance 2000-05, Vol.24 (5), p.665-694 |
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Format: | Artikel |
Sprache: | eng |
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Online-Zugang: | Volltext |
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Zusammenfassung: | This paper’s estimates and tests of Fed intervention profits are the first that explicitly adjust for foreign-exchange risk premia; failure to adjust may grossly affect estimated profits. Profits appear economically and statistically significant, whether risk premia are modeled as time-constant or as appreciation’s market beta depending on Fed intervention. The estimates are sensitive to the method of risk adjustment and to the periods used. Because a key variable, cumulative intervention, is
I(1), test statistics may have non-standard distributions, a problem affecting past tests; this paper’s tests account for non-standard distributions. Possible explanations of these profits have mixed empirical support in the literature. |
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ISSN: | 0378-4266 1872-6372 |
DOI: | 10.1016/S0378-4266(99)00047-3 |