Many published studies have considered information asymmetry between domestic and foreign investors about local assets in the stock market, particularly in developed markets. The present study proposes a new perspecti...Many published studies have considered information asymmetry between domestic and foreign investors about local assets in the stock market, particularly in developed markets. The present study proposes a new perspective to address the issue in the case of China ＂s forward exchange rate market. Following the framework of Clarida and Taylor （1997）, the term structures of exchange rates in the domestic forward and the non-deliverable forward markets are constructed and then applied to predict future spot exchange rates based on a vector equilibrium correction model By comparing the forecast accuracy on the basis of the root mean square error and the mean absolute error, it is shown that dynamic out-of- sample forecasts of the domestic forward market are superior to those of the non-deliverable forward market, suggesting that domestic investors are better informed than foreign investors. The result has several important policy implications, especially for exchange rate determination.展开更多
基金sponsored by the National Social Science Fund(11BJ022)the Guangdong Province Philosophy Social Science Planning Project(GD10CYJ02)the Guangdong High Level Talent Support Program(2011)
文摘Many published studies have considered information asymmetry between domestic and foreign investors about local assets in the stock market, particularly in developed markets. The present study proposes a new perspective to address the issue in the case of China ＂s forward exchange rate market. Following the framework of Clarida and Taylor （1997）, the term structures of exchange rates in the domestic forward and the non-deliverable forward markets are constructed and then applied to predict future spot exchange rates based on a vector equilibrium correction model By comparing the forecast accuracy on the basis of the root mean square error and the mean absolute error, it is shown that dynamic out-of- sample forecasts of the domestic forward market are superior to those of the non-deliverable forward market, suggesting that domestic investors are better informed than foreign investors. The result has several important policy implications, especially for exchange rate determination.
