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Risk Premia in Foreign Currency Futures
Author(s) -
Liu Christina Y.,
He Jia
Publication year - 1992
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.1992.tb01332.x
Subject(s) - futures contract , heteroscedasticity , currency , economics , financial economics , econometrics , risk premium , foreign exchange risk , maturity (psychological) , variance (accounting) , autoregressive conditional heteroskedasticity , monetary economics , volatility (finance) , psychology , developmental psychology , accounting
This paper tests the uncorrelatedness of increments of daily foreign currency futures prices and derives implications for risk premia based on a heteroscedasticity‐robust variance ratio test. There is evidence suggesting the existence of a time‐varying risk premia. Moreover, the results suggest that currency futures price is not an unbiased predictor of currency spot price on corresponding maturity date of currency futures contract. The paper also applies a heteroscedasticity‐adjusted Box‐Pierce Q test to the same data set for comparison.