Revisiting the forward-spot relation: an application of the nonparametric long-run correlation coefficient

Angelos Kanas, Christos Ioannidis

Research output: Contribution to journalArticle

Abstract

This study revisits the statistical relationship between the spot and the forward rate. Unlike previous studies, this association is measured by the estimation of the long-run correlation coefficient, a non-parametric measure of linear association. This estimator was shown to be equivalent to the Bartlett kernel spectral estimator of the complex coherency at frequency zero. This statistic allows for the measurement of the intensity of correlation. Using data for the £/DM over the May 1992 British General Election and September 1992 ERM devaluation, and for the FF/DM, BEF/DM, AT/DM, and NLG/DM up to the introduction of Euro, the results show that the predictive ability of the forward rate increased.
Original languageEnglish
Pages (from-to)148-161
Number of pages14
JournalJournal of Economics and Finance
Volume36
Issue number1
Early online date29 May 2010
DOIs
Publication statusPublished - Jan 2012

Fingerprint

Estimator
Correlation coefficient
Forward rates
Statistics
Predictive ability
Kernel
Elections
Devaluation

Keywords

  • spot
  • forward
  • peso problem
  • long-run correlation coefficient

Cite this

Kanas, Angelos ; Ioannidis, Christos. / Revisiting the forward-spot relation : an application of the nonparametric long-run correlation coefficient. In: Journal of Economics and Finance. 2012 ; Vol. 36, No. 1. pp. 148-161.
@article{b35a054ee8bd42bb9df2e56968ebb05f,
title = "Revisiting the forward-spot relation: an application of the nonparametric long-run correlation coefficient",
abstract = "This study revisits the statistical relationship between the spot and the forward rate. Unlike previous studies, this association is measured by the estimation of the long-run correlation coefficient, a non-parametric measure of linear association. This estimator was shown to be equivalent to the Bartlett kernel spectral estimator of the complex coherency at frequency zero. This statistic allows for the measurement of the intensity of correlation. Using data for the £/DM over the May 1992 British General Election and September 1992 ERM devaluation, and for the FF/DM, BEF/DM, AT/DM, and NLG/DM up to the introduction of Euro, the results show that the predictive ability of the forward rate increased.",
keywords = "spot, forward, peso problem, long-run correlation coefficient",
author = "Angelos Kanas and Christos Ioannidis",
year = "2012",
month = "1",
doi = "10.1007/s12197-010-9135-x",
language = "English",
volume = "36",
pages = "148--161",
number = "1",

}

Revisiting the forward-spot relation : an application of the nonparametric long-run correlation coefficient. / Kanas, Angelos; Ioannidis, Christos.

In: Journal of Economics and Finance, Vol. 36, No. 1, 01.2012, p. 148-161.

Research output: Contribution to journalArticle

TY - JOUR

T1 - Revisiting the forward-spot relation

T2 - an application of the nonparametric long-run correlation coefficient

AU - Kanas, Angelos

AU - Ioannidis, Christos

PY - 2012/1

Y1 - 2012/1

N2 - This study revisits the statistical relationship between the spot and the forward rate. Unlike previous studies, this association is measured by the estimation of the long-run correlation coefficient, a non-parametric measure of linear association. This estimator was shown to be equivalent to the Bartlett kernel spectral estimator of the complex coherency at frequency zero. This statistic allows for the measurement of the intensity of correlation. Using data for the £/DM over the May 1992 British General Election and September 1992 ERM devaluation, and for the FF/DM, BEF/DM, AT/DM, and NLG/DM up to the introduction of Euro, the results show that the predictive ability of the forward rate increased.

AB - This study revisits the statistical relationship between the spot and the forward rate. Unlike previous studies, this association is measured by the estimation of the long-run correlation coefficient, a non-parametric measure of linear association. This estimator was shown to be equivalent to the Bartlett kernel spectral estimator of the complex coherency at frequency zero. This statistic allows for the measurement of the intensity of correlation. Using data for the £/DM over the May 1992 British General Election and September 1992 ERM devaluation, and for the FF/DM, BEF/DM, AT/DM, and NLG/DM up to the introduction of Euro, the results show that the predictive ability of the forward rate increased.

KW - spot

KW - forward

KW - peso problem

KW - long-run correlation coefficient

UR - http://link.springer.com/article/10.1007%2Fs12197-010-9135-x

U2 - 10.1007/s12197-010-9135-x

DO - 10.1007/s12197-010-9135-x

M3 - Article

VL - 36

SP - 148

EP - 161

IS - 1

ER -