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Changes in Exchange Rates and Yield Differentials

  • Robert Z. Aliber

Abstract

Whether investors find it attractive to alter the currency mix of financial assets and liabilities in anticipation of changes in the exchange rates depends on how fully interest rate differentials and forward exchange rates reflect such anticipations. If Fisher Open holds continuously, changes in the currency mix of portfolios would not affect the firm’s income, net worth or market value; neither would changes in exchange rates. Thus a central question is whether the deviations from Fisher Open are so large that the concept has little empirical usefulness, or whether, if it is useful, deviations are systematic and predictable or random.

Keywords

Exchange Rate Interest Rate Forward Rate Treasury Bill Corporate International Finance 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Robert Z. Aliber 1978

Authors and Affiliations

  • Robert Z. Aliber

There are no affiliations available

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