This paper explores whether knowledge of the time-series properties of the premium in the pricing of forward foreign exchange can be usefully exploited in forecasting future spot exchange rates. Signal-extraction techniques, based on recursive application of the Kalman filter, are used to...

In this article, a survey database of exchange rate expectations is employed to examine EMS exchange risk premia. We are able to test a risk premium model directly, i.e. without having to rely on the rational expectations assumption. The results indicate that time-varying risk premia are almost...