1. – Senior Vice President, Ccil, Mumbai, Maharashtra, India.
| Received
24-Jun-2014 |
Accepted
- |
Published
24-Jun-2014 |
Abstract
Forward exchange rate bias explanation generally falls into two categories–assumption of rational expectation resulting in a risk premium and expectation errors which is systematic. The paper tests the bias in the Indian forward exchange markets using one-month
and three month forward contracts. The study finds that the three month contracts have larger prediction errors than the one-month contracts. The paper also finds that the prediction errors have information content which leads to assume the presence of risk premium. The study also finds that one-month contracts have lesser variability in risks vis-a-vis the three month contracts.
Locked
Subscribed
Open Access
Open Access