Exploration of the Foreign Exchange Forward Premiums and the Spot Exchange Return: A Multivariate Approach

Nessrine Hamzaoui; Boutheina Regaieg

Exploration of the Foreign Exchange Forward Premiums and the Spot Exchange Return: A Multivariate Approach

Year 2016, Volume: 6 Issue: 2, 694 - 702, 01.04.2016

Abstract

This paper empirically examines the interdependence between the foreign exchange forward premiums and the spot exchange return through a Multivariate GARCH type framework. The purpose of this study is to test the correlation sensitivity to shocks and the to capture the dynamic links between the EUR/USD 1,3, 6, 9 and 12-month forward premiums and the spot exchange return. Our empirical analysis is based on daily data from January 8, 1999 to January 8, 2016. Our daily analysis reveals the presence of high correlations between the unconditional EUR/USD forward exchange premiums at different horizons and the possible effect of asymmetric shocks on the conditional variance. The estimation results show that the dynamic conditional correlations have a relatively small and insignificant autoregressive effect, in addition to the existence of significant correlation sensitivity to shocks.

Keywords

Forward premium anomaly, DCC-MVGARCH, conditional volatility, Volatility Persistence.

Year 2016, Volume: 6 Issue: 2, 694 - 702, 01.04.2016

Nessrine Hamzaoui Boutheina Regaieg

Abstract

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Details

Other ID	JA87MP73VM
Journal Section	Research Article
Authors	Nessrine Hamzaoui This is me Boutheina Regaieg This is me
Publication Date	April 1, 2016
Published in Issue	Year 2016 Volume: 6 Issue: 2

Cite

APA	Hamzaoui, N., & Regaieg, B. (2016). Exploration of the Foreign Exchange Forward Premiums and the Spot Exchange Return: A Multivariate Approach. International Journal of Economics and Financial Issues, 6(2), 694-702.
AMA	Hamzaoui N, Regaieg B. Exploration of the Foreign Exchange Forward Premiums and the Spot Exchange Return: A Multivariate Approach. IJEFI. April 2016;6(2):694-702.
Chicago	Hamzaoui, Nessrine, and Boutheina Regaieg. “Exploration of the Foreign Exchange Forward Premiums and the Spot Exchange Return: A Multivariate Approach”. International Journal of Economics and Financial Issues 6, no. 2 (April 2016): 694-702.
EndNote	Hamzaoui N, Regaieg B (April 1, 2016) Exploration of the Foreign Exchange Forward Premiums and the Spot Exchange Return: A Multivariate Approach. International Journal of Economics and Financial Issues 6 2 694–702.
IEEE	N. Hamzaoui and B. Regaieg, “Exploration of the Foreign Exchange Forward Premiums and the Spot Exchange Return: A Multivariate Approach”, IJEFI, vol. 6, no. 2, pp. 694–702, 2016.
ISNAD	Hamzaoui, Nessrine - Regaieg, Boutheina. “Exploration of the Foreign Exchange Forward Premiums and the Spot Exchange Return: A Multivariate Approach”. International Journal of Economics and Financial Issues 6/2 (April 2016), 694-702.
JAMA	Hamzaoui N, Regaieg B. Exploration of the Foreign Exchange Forward Premiums and the Spot Exchange Return: A Multivariate Approach. IJEFI. 2016;6:694–702.
MLA	Hamzaoui, Nessrine and Boutheina Regaieg. “Exploration of the Foreign Exchange Forward Premiums and the Spot Exchange Return: A Multivariate Approach”. International Journal of Economics and Financial Issues, vol. 6, no. 2, 2016, pp. 694-02.
Vancouver	Hamzaoui N, Regaieg B. Exploration of the Foreign Exchange Forward Premiums and the Spot Exchange Return: A Multivariate Approach. IJEFI. 2016;6(2):694-702.