Risk Aversion, Efficient Markets and the Forward Exchange Rate
نویسنده
چکیده
ISK is a characteristic of existence. Attempts to avoid it explain such arrangements as insurance, limited liability firms and diversification of investment portfolios. In recent years, risk aversion and the attendant premium for risk-bearing have been used increasingly to explain a stubborn paradox in the empirical exchange rate literature: the failure of the forward exchange rate to he an unbiased predictor of the future spot exchange rate.
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