Article | Quarterly Journal of Economics

Forward Discount Bias: Is It an Exchange Risk Premium?

by K. A. Froot and J. Frankel

Keywords: Currencies; Exchange rates; International macroeconomics; monetary policy; Currency controls; Fixed exchange rates; Floating exchange rates; Currency bands; Currency zones; Currency areas; rational expectations; Asset Pricing;


Froot, K. A., and J. Frankel. "Forward Discount Bias: Is It an Exchange Risk Premium?" Quarterly Journal of Economics 104, no. 1 (February 1989): 139–161. (Revision of "Findings of Forward Discount Bias Interpreted in Light of Exchange Rate Survey Data," NBER Working Paper No. 1963 and Sloan Working Paper No. 1906-87, August 1987. Reprinted in Advances in Behavioral Finance, edited by Richard Thaler. New York: Russell Sage Foundation, 1993: 359-382 and in Speculation and Financial Markets, edited by M. Taylor and L. Gallagher. Cheltenham: Edward Elgar Publishing, 2001.)