A0600
Title: New insights on the foreign exchange risk premium through a portfolio-based approach
Authors: Taejin Kim - Korea University (Korea, South) [presenting]
Jinyong Kim - University of Seoul (Korea, South)
Kun Ho Kim - Concordia University (Canada)
Abstract: A simple and tractable framework is proposed for the forward premium regression to estimate foreign exchange risk premium. In contrast to previous work, we adopt the portfolio-based approach. Relevant methodology is applied to estimate the risk premiums for six currency portfolios. The empirical results show temporal variation and co-movement among estimates of the time-varying risk premiums. The study also illustrates that U.S. fundamentals have persistent power in predicting future risk premiums.
