| dc.description.abstract | This thesis has two main aims, split into two parts. The aim of the first part is to see if the
unbiasedness hypothesis holds for some of the world’s most liquid currency pairs. The
objective is to gather new data on spot and forward rates with three different maturity lengths
from 1996 up until 2018, and test these data using mean comparison t-tests and time series
regression analyses.
The results reveal that the unbiasedness hypothesis does not seem to hold for most currency
pairs for the one month, one week or overnight maturities. There are also some evidence
indicating the presence of the forward premium puzzle for some currency pairs, especially in
the monthly and overnight maturities.
The aim of the second part is to uncover potential statistical relationships between the
deviation from the unbiasedness hypothesis and leading explanatory variables. In extension,
these relationships could be used to predict future deviations from the unbiasedness
hypothesis and thus increase excess return from carry trade. The objective for this part of the
thesis is to collect data on various relevant economic variables and test the explanatory power
of these variables, using regression analysis and a direction of change-model.
Most notably, we find that the Baltic Dry Index has served as a positive, leading indicator of
deviations from the unbiasedness hypothesis in the period of our analysis. We also find
evidence of a relationship for the CBOE Volatility Index which varies with the length of
maturity, and a negative relationship for the S&P 500 index. However, we do not find any
relationship between the deviation from the unbiasedness hypothesis and the USD
denominated LIBOR, the Brent crude oil price or the bid-ask spread for the foreign exchange
spot. | nb_NO |
