Replication data for: The Quanto Theory of Exchange Rates

Name	File Type	Size	Last Modified
20180019_Data.xlsx	application/vnd.openxmlformats-officedocument.spreadsheetml.sheet	1010.6 KB	10/12/2019 03:48:AM
ReadMe.pdf	application/pdf	122.7 KB	10/12/2019 03:48:AM
Regression.m	text/plain	11.4 KB	10/12/2019 03:48:AM
bootstrap.m	text/plain	9.1 KB	10/12/2019 03:48:AM
dmtest.m	text/plain	1.1 KB	10/12/2019 03:48:AM
loop1DBB.m	text/plain	210 bytes	10/12/2019 03:48:AM
ssd.m	text/x-fortran	4.5 KB	10/12/2019 03:48:AM
variables.m	text/plain	2.5 KB	10/12/2019 03:48:AM

Project Description

Summary: 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:
      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

Related Publications

Download this project

Published Versions

V1 [2019-10-12]

Export Metadata

Dublin Core

DDI 2.5

Report a Problem

Found a serious problem with the data, such as disclosure risk or copyrighted content? Let us know.

This material is distributed exactly as it arrived from the data depositor. ICPSR has not checked or processed this material. Users should consult the investigator(s) if further information is desired.