Non-Linear Models and The Forward Discount Anomaly : An Empirical Investigation.

LANOUAR CHARFEDDINE

Abstract


In this paper, we propose a non-linear approach to  explain the forward discount anomaly. We use two classes of non-linear models: models with changes in mean and long memory process. Our empirical results show that the non-stationarity of the forward discount series is the causes of the rejection of the Forward Unbiased Hypothesis (FRUH). By investigating the forward discount series, we show that are characterized by a stationary long memory behavior which is amplified by the presence of breaks.


Full Text: PDF DOI: 10.5539/ijef.v2n1p81

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International Journal of Economics and Finance  ISSN  1916-971X (Print) ISSN  1916-9728 (Online)

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