Resolving the unbiasedness and forward premium puzzles
By: by Daniel L. Thornton.
Contributors: Federal Reserve Bank of St. Louis.
Series: Working paper -- 2007-014A; Working paper (Federal Reserve Bank of St. Louis : Online) -- 2007-014A.
Publisher: Federal Reserve Bank of St. Louis
Published: 2007
Place of publication: [St. Louis, Mo.]
Language: eng
Format: Electronic resource
Description: "There are two unresolved puzzles in the empirical foreign exchange literature.  The first is the finding that tests of forward rate unbiasedness using the forward rate and forward premium equations yield markedly different conclusions.  A companion puzzle--the forward premium puzzle--is the fact that the forward premium incorrectly predicts the direction of the subsequent change in the spot rate, which implies a massive rejection of uncovered interest parity.  This paper resolves both puzzles"--Federal Reserve Bank of St. Louis web site.
Notes: Title from PDF file as viewed on 4/16/2007.

Includes bibliographical references.

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