The Long Memory Behavior of the EUR/USD Forward Premium

This paper empirically investigates the contribution of the term structure of the forward premium to explain the long memory behavior that can characterize the forward premium. We apply our empirical study on1-month, 3-month, 6-month, 9-month and 1-year forward premiums of the EUR/USD over 17 years...

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Main Authors: Nessrine Hamzaoui, Boutheina Regaieg
Format: Article
Language:English
Published: EconJournals 2017-09-01
Series:International Journal of Economics and Financial Issues
Subjects:
Online Access:https://dergipark.org.tr/tr/pub/ijefi/issue/32021/354273?publisher=http-www-cag-edu-tr-ilhan-ozturk
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spelling doaj-46709ac2bef9453ab26f8a998cfff7b12020-11-25T01:44:26ZengEconJournalsInternational Journal of Economics and Financial Issues2146-41382017-09-01734374431032The Long Memory Behavior of the EUR/USD Forward PremiumNessrine HamzaouiBoutheina RegaiegThis paper empirically investigates the contribution of the term structure of the forward premium to explain the long memory behavior that can characterize the forward premium. We apply our empirical study on1-month, 3-month, 6-month, 9-month and 1-year forward premiums of the EUR/USD over 17 years with a daily frequency from 08 January 1999 to 08 January 2016. Therefore, we estimate the ARFIMA model by a semi-parametric method that is Geweke and Porter-Hudak (1983) and a parametric model namely the maximum likelihood method. The estimation results of long memory parameter confirm the persistence and the fractional dynamics of the forward premium. Moreover, both approaches are consistent when it is the case of 6, 9 and 12 months horizons. These findings bring into question the relevance of the term structure of the foreign exchange forward premium in the determination of the long memory attitude.https://dergipark.org.tr/tr/pub/ijefi/issue/32021/354273?publisher=http-www-cag-edu-tr-ilhan-ozturkarfima box-jenkins gph method whittle long memory.
collection DOAJ
language English
format Article
sources DOAJ
author Nessrine Hamzaoui
Boutheina Regaieg
spellingShingle Nessrine Hamzaoui
Boutheina Regaieg
The Long Memory Behavior of the EUR/USD Forward Premium
International Journal of Economics and Financial Issues
arfima
box-jenkins
gph method
whittle
long memory.
author_facet Nessrine Hamzaoui
Boutheina Regaieg
author_sort Nessrine Hamzaoui
title The Long Memory Behavior of the EUR/USD Forward Premium
title_short The Long Memory Behavior of the EUR/USD Forward Premium
title_full The Long Memory Behavior of the EUR/USD Forward Premium
title_fullStr The Long Memory Behavior of the EUR/USD Forward Premium
title_full_unstemmed The Long Memory Behavior of the EUR/USD Forward Premium
title_sort long memory behavior of the eur/usd forward premium
publisher EconJournals
series International Journal of Economics and Financial Issues
issn 2146-4138
publishDate 2017-09-01
description This paper empirically investigates the contribution of the term structure of the forward premium to explain the long memory behavior that can characterize the forward premium. We apply our empirical study on1-month, 3-month, 6-month, 9-month and 1-year forward premiums of the EUR/USD over 17 years with a daily frequency from 08 January 1999 to 08 January 2016. Therefore, we estimate the ARFIMA model by a semi-parametric method that is Geweke and Porter-Hudak (1983) and a parametric model namely the maximum likelihood method. The estimation results of long memory parameter confirm the persistence and the fractional dynamics of the forward premium. Moreover, both approaches are consistent when it is the case of 6, 9 and 12 months horizons. These findings bring into question the relevance of the term structure of the foreign exchange forward premium in the determination of the long memory attitude.
topic arfima
box-jenkins
gph method
whittle
long memory.
url https://dergipark.org.tr/tr/pub/ijefi/issue/32021/354273?publisher=http-www-cag-edu-tr-ilhan-ozturk
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