Conditions of pure arbitrage applications: Evidence from three currencies

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dc.citation.issue3
dc.citation.volume11
dc.contributor.authorChen J
dc.contributor.authorBin L
dc.contributor.authorZhao P
dc.date.available2016
dc.date.issued2016
dc.description.abstractThis study analyzes the pure arbitrage conditions across three of the “Anglo-Saxon capitalism” currencies: Australian dollar, British pound, and US dollar. We examine the relationship between spot-forward exchange rates and domesticforeign interest rates in financial markets. We find that the most important determinants that contribute to the occurrence of pure arbitrage conditions are domestic spot currency rate and domestic interest rate. Daily data is collected from the DataStream/Thomson Reuters database and analyzed in probit regression models. The predicting accuracy check is conducted through in-sample and out-of-sample tests. Our results indicate that the level of significance for factor coefficients and prediction accuracy decrease with the time lag: the longer the time lag, the lower the prediction power.
dc.description.confidentialFALSE
dc.format.extentNov-20
dc.identifier.citationEconomics, Management, and Financial Markets, 2016, 11 (3), pp. 11 - 20
dc.identifier.elements-id343698
dc.identifier.harvestedMassey_Dark
dc.identifier.issn1842-3191
dc.identifier.urihttps://hdl.handle.net/10179/10915
dc.publisherAddleton Academic Publishers
dc.relation.isPartOfEconomics, Management, and Financial Markets
dc.subject.anzsrc1402 Applied Economics
dc.titleConditions of pure arbitrage applications: Evidence from three currencies
dc.typeJournal article
pubs.notesNot known
pubs.organisational-group/Massey University
pubs.organisational-group/Massey University/Massey Business School
pubs.organisational-group/Massey University/Massey Business School/School of Economics and Finance
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