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The Forward Premium Puzzle in a Model of Imperfect Information: Theory and Evidence

8 Pages Posted: 31 Aug 1998 Last revised: 28 Dec 2014

Rui A. Albuquerque

Boston College, Carroll School of Management; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Date Written: August 16, 2007

Abstract

This paper studies the forward premium puzzle in a model with imperfect information. The model predicts fixed effects and conditional heteroskedasticity in the forward premium regression and provides a rationale for the evidence in Mayfield and Murphy (1992).

Keywords: Forward premium puzzle, imperfect information, Kalman filter, fixed effects, conditional heteroskedasticity

JEL Classification: F31

Suggested Citation

Albuquerque, Rui A., The Forward Premium Puzzle in a Model of Imperfect Information: Theory and Evidence (August 16, 2007). Economics Letters, Vol. 99, 2008. Available at SSRN: https://ssrn.com/abstract=111788 or http://dx.doi.org/10.2139/ssrn.111788

Rui A. Albuquerque (Contact Author)

Boston College, Carroll School of Management ( email )

140 Commonwealth Avenue
Chustnut Hill, MA 02467-3808
United States

HOME PAGE: http://ruialbuquerque.webs.com

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

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