TY  - JOUR
AU  - Bekaert,Geert
TI  - The Time Variation of Risk and Return in Foreign Exchange Markets: A    General Equilibrium Perspective
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4818
PY  - 1996
Y2  - October 1996
UR  - http://www.nber.org/papers/w4818
L1  - http://www.nber.org/papers/w4818.pdf
N1  - Author contact info:
Geert Bekaert
Graduate School of Business
Columbia University
3022 Broadway, 411 Uris Hall
New York, NY 10027
Tel: 212/854-9156
Fax: 212/662-8474
E-Mail: gb241@columbia.edu
AB  - This paper investigates the statistical properties of high frequency nominal exchange rates and forward premiums in the context of a dynamic two-country general equilibrium model.  Primary focus is on the persistence, variability, leptokurtosis and conditional heteroskedasticity of exchange rates and on the behavior of foreign exchange risk premiums.  The model combines temporal dependencies in preferences with a transaction cost technology that generates a role for money.  Agents in the economy make decisions on a weekly frequency and face shocks which display time-varying uncertainty.  Simulations reveal that the model accounts for the statistical properties of exchange rate data much more accurately than previous structural models.
ER  -