Testing the risk premium and cost-of-carry hypotheses for currency futures contracts

Applied Financial Economics

Volumn 10, Issue 3, 2000, Pages 277-289

  Sequeira, John M ^b   McAleer, Michael ^a  

^a UNIVERSITY OF WESTERN AUSTRALIA   (Australia)

^b UNIVERSITY OF MELBOURNE   (Australia)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 0000939903     PISSN: 09603107     EISSN: None     Source Type: Journal    
DOI: 10.1080/096031000331680     Document Type: Article

References (45)

1. Amin, K. I. and Jarrow, R. A. (1991) Pricing foreign currency options under stochastic interest rates, Journal of International Money and Finance, 10, 310-29.
2. Ayuso, J. and Restoy, F. (1996) Interest rate parity and foreign exchange risk premia in the ERM, Journal of International Money and Finance, 15, 369-82.
3. Banerjee, A., Dolado, J., Galbraith, J. W. and Hendry, D. F. (1993) Co-integration, Error-correction, and the Economic Analysis of Non-stationary data, Oxford University Press, Oxford.
4. Brenner, R. J. and Kroner, K. F. (1995) Arbitrage, cointegration and testing the unbiasedness hypothesis in financial markets, Journal of Financial and Quantitative Analysis, 30, 23-42.
5. Campbell, J. Y. and Perron, P. (1991) Pitfalls and opportunities: what macroeconomists should know about unit roots, NBER Macroeconomics Annual, 6, (Eds) Blanchard, O. J. and Fischer, S., MIT Press, Cambridge, pp. 141-201.
6. Clark, P. K. (1973) A subordinated stochastic process model with finite variance for speculative price, Econometrica, 41, 135-59.
7. Cootner, P. H. (1964) The Random Character of Stock Market Prices, MIT Press, Cambridge, MA.
8. Dastoor, N. K. (1983) Some aspects of testing non-nested hypotheses, Journal of Econometrics, 21, 213-28.
9. Davidson, R. and MacKinnon, J. G. (1981) Several tests for model specification in the presence of alternative hypothesis, Econometrica, 49, 781-93.
10. Deaton, A. S. (1982) Model selection procedures, or does the consumption function exist?, in: Evaluating the Reliability of Macroeconomic Models, (Eds) G. C. Chow, and P. Corsi, Wiley, New York, pp. 43-65.
11. Dusak, K. (1973) Futures trading and investor returns: an investigation of commodity market risk premiums, Journal of Political Economy, 81, 1387-406.
12. Engle, R. F. and Granger, C. W. J. (1987) Cointegration and error correction: representation, estimation and testing, Econometrica, 55, 251-76.
13. Engle, R. F. and Granger, C. W. J. (1991) Long-Run Economic Relationship: Readings in Cointegration, Oxford University Press, Oxford.
14. Fama, E. and Farber, A. (1979) Money, bonds and foreign exchange, American Economic Review, 69, 269-82.
15. Fama, E. (1984) Forward and spot exchange rates, Journal of Monetary Economics, 14, 319-38.
16. Fama, E. F. and French, K. R. (1987) Commodity futures prices: some evidence on forecast power, premiums and the theory of storage, Journal of Business, 60, 55-73.
17. Fisher, G. R. and McAleer, M. (1981) Alternative procedures and associated tests of significance for non-nested hypotheses, Journal of Econometrics, 16, 103-19.
18. Frachot, A. (1996) A re-examination of the uncovered interest rate parity hypothesis, Journal of International Money and Finance, 15, 419-37.
19. Frenkel, J. A. and Razin, A. (1980) Stochastic prices and tests of efficiency of foreign exchange markets, Economics Letters, 6, 165-70.
20. Godfrey, L. G. and Pesaran, M. H. (1983) Tests of non-nested regression models: small sample adjustments and Monte Carlo evidence, Journal of Econometrics, 21, 133-54.
21. Gourieroux, C., Montfort, A. and Trognon, A. (1983) Testing nested or non-nested hypotheses? Journal of Econometrics, 21, 83-115.
22. Granger, C. W. J. and Newbold, P. (1974) Spurious regressions in econometrics, Journal of Econometrics, 1, 111-20.
23. Grauer, F., Litzenberger, R. and Stehle, R. (1976) Sharing rules and equilibrium in an international capital market under uncertainty, Journal of Financial Economics, 3, 233-56.
24. Hakkio, C. S. (1981) The term structure of the forward premium, Journal of Monetary Economics, 8, 41-58.
25. Heaney, R. A. and Layton, A. P. (1996) A test of the cost of carry relationship for the Australian 90 day bank accepted bill futures market, Applied Financial Economics, 6, 143-53.
26. Heath, D., Jarrow, R. A. and Morton, A. (1992) Bond pricing and the term structure of interest rates: a new methodology for contingent claims valuation, Econometrica, 60, 77-105.
27. Hendry, D. F. and Mizon, G. E. (1978) Serial correlation as a convenient simplification not a nuisance: a comment on the study of the demand for money by the Bank of England, Economic Journal, 88, 549-63.
28. Hodrick, R. J. (1981) International asset pricing with time varying risk premia, Journal of International Economics, 11, 573-87.
29. Johansen, S. (1988) Statistical analysis of cointegration vectors, Journal of Economic Dynamics and Control, 12, 231-54.
30. Kouri, P. (1977) International investment and interest rate linkages under flexible exchange rates, in: The Political Economy of Monetary Reform, (Ed.) R. Z. Aliber, Macmillan, London, pp. 74-96.
31. Lucas, R. E., Jr (1982) Interest rates and currency prices in a two-country world, Journal of Monetary Economics, 10, 335-60.
32. MacKinnon, J. G. (1991) Critical values for cointegration tests, in: Long Run Relationships: Readings in Cointegration, (Eds) R. F. Engle and C. W. J. Granger, Oxford University Press, New York, pp. 267-87.
33. McAleer, M. (1995) The significance of testing empirical non-nested models, Journal of Econometrics, 67, 149-71.
34. McAleer, M. and Pesaran, M. H. (1986) Statistical inference in non-nested econometric models, Applied Mathematics and Computation, 20, 271-311.
35. Mizon, G. E. and Richard, J. F. (1986) The encompassing principle and its application to non-nested hypotheses, Econometrica, 54, 657-78.
36. Park, J. Y. and Phillips, P. C. B. (1989) Statistical inference in regressions with integrated processes: Part 2, Econometric Theory, 5, 95-132.
37. Perron, P. (1989) The great crash, the oil price shock, and the unit root hypothesis, Econometrica, 57, 1361-401.
38. Pesaran, M. H. (1974) On the general problem of model selection, Review of Economic Studies, 41, 153-71.
39. Roll, R. and Solnik, B. (1979) On some parity conditions frequently encountered in international economics, Journal of Macroeconomics, 1, 267-83.
40. Sequeira, J. M. (1996) Time series analysis of settlement prices for individual currency futures in Singapore, Applied Economics Letters, 3, 673-6.
41. Sequeira, J. M. (1997) Econometric modelling of long run relationships in the Singapore currency futures market, Mathematics and Computers in Simulation, 43, 421-8.
42. Solnik, B. H. (1973) European Capital Markets, D. C. Heath, Lexington, MA.
43. Stockman, A. C. (1978) Risk, information and forward exchange rates, in: The Economics of Exchange Rates, (Eds) J. A. Frenkel and H. G. Johnson, Addison-Wesley, Reading, MA, pp. 159-78.
44. Stulz, R. (1981) A model of international asset pricing, Journal of Financial Economics, 9, 383-406.
45. Working, H. (1948) Theory of the inverse carrying charge in futures markets, Journal of Farm Economics, 30, 1-28.