Does the Fed beat the foreign-exchange market?
نویسنده
چکیده
This paperÕs estimates and tests of Fed intervention pro®ts are the ®rst that explicitly adjust for foreign-exchange risk premia; failure to adjust may grossly aect estimated pro®ts. Pro®ts appear economically and statistically signi®cant, whether risk premia are modeled as time-constant or as appreciationÕs market beta depending on Fed intervention. The estimates are sensitive to the method of risk adjustment and to the periods used. Because a key variable, cumulative intervention, is I(1), test statistics may have non-standard distributions, a problem aecting past tests; this paperÕs tests account for non-standard distributions. Possible explanations of these pro®ts have mixed empirical support in the literature. Ó 2000 Elsevier Science B.V. All rights reserved. JEL classi®cation: F31; F33; G15; E58
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