Replication data for: The Quanto Theory of Exchange Rates
Principal Investigator(s): View help for Principal Investigator(s) Lukas Kremens; Ian Martin
Version: View help for Version V1
| Name | File Type | Size | Last Modified |
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| 20180019_data | 10/12/2019 07:48:AM | ||
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text/plain | 14.6 KB | 10/12/2019 03:48:AM |
Project Citation:
Kremens, Lukas, and Martin, Ian. Replication data for: The Quanto Theory of Exchange Rates. Nashville, TN: American Economic Association [publisher], 2019. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2019-10-12. https://doi.org/10.3886/E113206V1
Project Description
Summary:
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We present a new identity that relates expected exchange rate appreciation to a risk-neutral covariance term, and use it to motivate a currency forecasting variable based on the prices of quanto index contracts. We show via panel regressions that the quanto forecast variable is an economically and statistically significant predictor of currency appreciation and of excess returns on currency trades. Out of sample, the quanto variable outperforms predictions based on uncovered interest parity, on purchasing power parity, and on a random walk as a forecaster of differential (dollar-neutral) currency appreciation.
Scope of Project
JEL Classification:
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C53 Forecasting Models; Simulation Methods
E43 Interest Rates: Determination, Term Structure, and Effects
F31 Foreign Exchange
F37 International Finance Forecasting and Simulation: Models and Applications
G12 Asset Pricing; Trading Volume; Bond Interest Rates
G15 International Financial Markets
C53 Forecasting Models; Simulation Methods
E43 Interest Rates: Determination, Term Structure, and Effects
F31 Foreign Exchange
F37 International Finance Forecasting and Simulation: Models and Applications
G12 Asset Pricing; Trading Volume; Bond Interest Rates
G15 International Financial Markets
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