Autori
Gallo, Giampiero M.
Pacini, Barbara

Titolo
Time-varying/sign-switching risk perception on foreign exchange markets
Periodico
European University Institute of Badia Fiesolana (Fi). Department of Economics - Working papers
Anno: 1995 - Fascicolo: 45 - Pagina iniziale: 1 - Pagina finale: 35

In this paper we reconsider the relationship between spot and forward rates, augmented by a term which contains a measure of conditional volatility. Previous parametric specifications such as the GARCH-M provided disappointing results possibly due to the degree of persistence on the estimated conditional volatility. Instead, we propose a semiparametric estimator based on a nonparametric measure of the conditional volatility and we estimate the relationship with monthly data on six currencies vis-à-vis the Deutsche Mark . Another advantage of such a procedure is that data available at different frequencies can be used, as well as an indicator of market sentiment in the form of trading signals to purchase or sell a currency.



Testo completo: http://hdl.handle.net/1814/570

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