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Table 1
Unconditional correlation with the excess return ( 1 j )
f s
-0.209
i us
c us
cuk
p us
puk
mus
muk
y us
y uk
-0.076
-0.079
-0.072
0.002
0.055
0.095
-0.002
-0.179
-0.092
Table 2a
Estimates of the benchmark model of the FOREX excess return
The excess return equation in the multivariate GARCH in mean model
Normal distribution
Dependent
Variable
US
UK
Constant
Vt ( Rt +1 )
-0.0004
0.0004
Ct ( Rt +1 , ft +1 st +1 )
0.063
(0.66)
-0.073
(0.55)
0.047
(0.49)
-0.078
(0.58)
1251.6
(3.30)
0.617
(4.96)
0.266
(2.73)
1246.3
(3.35)
0.622
(5.00)
0.261
(2.71)
Ct ( Rt +1 , itus+1 )
Rt
f t st
itus
Conditional variance
Constant
t2 ( Rt +1 )
t2
t2
US & UK General
Non-switching
model
1.636
(0.31)
-0.004
(0.64)
0.057
-0.084
(0.62)
(0.78)
-0.078
0.048
(0.58)
(0.38)
0.352
(5.68)
-1.683
(2.51)
-1.899
(1.03)
1257.1
(2.89)
0.620
(5.10)
0.265
(2.56)
914.9
(5.25)
0.662
(5.02)
0.164
(2.34)
US & UK General
switching model
0.050
(0.56)
-0.065
(0.49)
1177.7
(3.57)
0.659
(6.02)
0.290
(3.57)
-0.123
(1.31)
Rt +1
1.684
(0.31)
-0.005
(0.63)
-0.087
(0.79)
0.048
(0.38)
0.345
(5.33)
-1.790
(2.36)
-1.914
(1.01)
912.8
(5.38)
0.679
(4.85)
0.173
(2.32)
-0.040
(0.37)
Table 2b
Estimates of the benchmark model of the FOREX excess return
The excess return equation in the multivariate GARCH in mean model
t-distribution
Dependent
Variable
US
UK
Constant
Vt ( Rt +1 )
-0.0004
0.0004
Ct ( Rt +1 , ft +1 st +1 )
0.088
(0.97)
-0.103
(0.82)
0.069
(0.76)
-0.106
(0.85)
1402.4
(2.01)
0.638
(4.49)
0.263
(2.24)
1383.0
(2.06)
0.648
(4.60)
0.254
(2.21)
Ct ( Rt +1 , itus+1 )
Rt
f t st
itus
Conditional variance
Constant
t2 ( Rt +1 )
t2
t2
US & UK General
Non-switching
model
4.551
(0.68)
-0.009
(1.03)
0.081
-0.115
(0.88)
(1.08)
-0.109
0.074
(0.86)
(0.62)
0.334
(5.62)
-2.271
(3.37)
-1.843
(1.04)
1395.4
(2.02)
0.643
(4.55)
0.259
(2.23)
867.4
(5.49)
0.624
(3.93)
0.149
(2.00)
US & UK General
switching model
0.063
(0.69)
-0.079
(0.63)
1271.0
(2.66)
0.652
(4.17)
0.291
(2.61)
-0.100
(0.97)
Rt +1
4.751
(0.68)
-0.010
(1.01)
-0.117
(1.08)
0.074
(0.61)
0.327
(5.27)
-2.357
(3.17)
-1.863
(1.03)
869.6
(5.51)
0.645
(3.95)
0.162
(1.99)
-0.042
(0.42)
Table 3a
Estimates of the C-CAPM for the FOREX excess return
The excess return equation in the multivariate GARCH in mean model
Normal distribution
Dependent
Variable
US
UK
Constant
Vt ( Rt +1 )
-0.0004
Ct ( Rt +1 , ctus+1 )
0.0004
0.024
(2.09)
Ct ( Rt +1 , ctuk+1 )
-0.016
(1.92)
Ct ( Rt +1 , ptus+1 )
-0.104
(1.68)
Ct ( Rt +1 , ptuk+1 )
0.039
(2.02)
Rt
f t st
Conditional variance
Constant
t2 ( Rt +1 )
t2
1290.3
(2.96)
0.627
(5.45)
0.269
(2.92)
t2
Notes: 1. Dependent variable is
2. Ct ( xt +1 , yt +1 ) =
1252.2
(3.19)
0.607
(5.28)
0.277
(3.08)
US & UK General
Non-switching
model
-0.282
(0.031)
-0.003
(0.36)
0.027
0.021
(2.20)
(1.39)
-0.012
-0.013
(1.23)
(1.45)
-0.030
-0.061
(0.22)
(0.35)
-0.013
0.005
(0.21)
(0.066)
0.351
(5.14)
-1.722
(2.70)
1283.1
(2.87)
0.624
(5.56)
0.273
(3.05)
921.3
(5.08)
0.676
(5.76)
0.175
(2.87)
US & UK General
switching model
0.028
(1.91)
-0.037
(0.56)
0.020
(0.13)
-0.162
(1.57)
1.379
(0.15)
-0.005
(0.50)
0.015
(0.87)
-0.013
(1.49)
-0.011
(0.06)
-0.010
(0.15)
0.330
(5.13)
-2.057
(2.31)
1167.5
(3.67)
0.674
(6.73)
0.298
(4.16)
-0.162
(1.57)
953.1
(4.49)
0.737
(6.11)
0.211
(2.72)
-0.136
(1.40)
Rt +1
Table 3b
Estimates of the C-CAPM for the FOREX excess return
The excess return equation in the multivariate GARCH in mean model
t-distribution
Dependent
Variable
Constant
Vt ( Rt +1 )
US
UK
-0.0004
0.0004
Ct ( Rt +1 , ctus+1 )
0.019
(1.85)
Ct ( Rt +1 , ctuk+1 )
-0.017
(2.17)
Ct ( Rt +1 , ptus+1 )
-0.073
(1.34)
Ct ( Rt +1 , ptuk+1 )
0.043
(2.33)
Rt +1
f t st
Conditional variance
Constant
t2 ( Rt +1 )
t2
1424.4
(1.94)
0.642
(4.56)
0.262
(2.26)
t2
Notes: 1. Dependent variable is
2. Ct ( xt +1 , yt +1 ) =
1366.0
(2.03)
0.632
(4.63)
0.268
(2.36)
US & UK General
Non-switching model
0.624
(0.07)
-0.015
(1.48)
0.016
0.013
(1.50)
(1.06)
-0.017
-0.020
(1.97)
(2.19)
-0.087
0.034
(1.20)
(0.28)
0.047
0.061
(1.83)
(1.98)
0.332
(5.00)
-2.432
(3.95)
1426.3
(1.76)
0.636
(4.79)
0.273
(2.37)
850.7
(5.56)
0.649
(3.98)
0.145
(2.03)
US & UK General
switching model
0.905
(0.12)
-0.014
(1.25)
0.019
0.007
(1.22)
(0.45)
-0.017
-0.022
(2.35)
(2.69)
-0.086
0.001
(1.00)
(0.01)
0.044
0.054
(1.50)
(1.63)
0.309
(5.10)
-2.664
(2.68)
1298.0
(2.58)
0.666
(6.83)
0.300
(3.74)
-0.124
(1.15)
Rt +1
969.3
(3.28)
0.752
(6.78)
0.218
(2.47)
-0.168
(1.74)
Table 4a
Estimates of the monetary model of the FOREX excess return
The excess return equation in the multivariate GARCH in mean model
Normal distribution
Dependent
Variable
Constant
US
UK
Vt ( Rt +1 )
-.0004
0.0004
Ct ( Rt +1 , mtus+1 )
0.131
(1.25)
-0.089
(2.27)
Ct (Rt+1, mtuk+1)
Ct ( Rt +1 , ytus+1 )
-0.041
(1.16)
Ct ( Rt +1 , ytuk+1 )
0.042
(2.55)
Rt
f t st
Conditional variance
Constant
1185.0
(3.97)
2
0.621
t ( Rt +1 )
(4.75)
0.244
t2
(2.78)
1181.2
(3.46)
0.628
(5.29)
0.250
(2.68)
US & UK
General
Non-switching model
21.898
(2.04)
0.011
(1.02)
0.121
-0.343
(1.48)
(1.58)
-0.034
-0.029
(0.84)
(0.73)
-0.109
-0.070
(2.84)
(1.77)
0.054
0.034
(3.41)
(2.11)
0.321
(5.13)
-1.333
(2.17)
1099.6
(3.76)
0.634
(5.53)
0.227
(2.54)
t2
Notes: 1. Dependent variable is
2. Ct ( xt +1 , yt +1 ) =
946.3
(3.93)
0.698
(6.43)
0.179
(2.58)
US & UK
General
switching model
23.150
(1.86)
0.009
(0.66)
0.141
-0.331
(1.82)
(1.25)
-0.080
-0.044
(2.15)
(1.03)
-0.094
(2.71)
-0.071
(1.61)
0.064
(4.69)
0.039
(2.20)
0.306
(4.68)
-1.635
(1.97)
952.6
(6.31)
0.621
(8.08)
0.369
(4.81)
-0.332
(3.49 )
990.3
(4.10)
0.713
(6.99)
0.236
(3.07)
-0.141
(1.66)
Rt +1
Table 4b
Estimates of the monetary model of the FOREX excess return
The excess return equation in the multivariate GARCH in mean model
t-distribution
Dependent
Variable
US
UK
Constant
Vt ( Rt +1 )
-0.0004
Ct ( Rt +1 , mtus+1 )
0.153
(1.68)
Ct ( Rt +1 , mtuk+1 )
Ct ( Rt +1 , ytus+1 )
0.0004
-0.080
(2.23)
-0.049
(1.59)
Ct ( Rt +1 , ytuk+1 )
0.038
(2.49)
Rt +1
f t st
Conditional variance
Constant
t2 ( Rt +1 )
t2
1216.8
(2.83)
0.644
(4.20)
0.231
(2.15)
t2
Notes: 1. Dependent variable is
2. Ct ( xt +1 , yt +1 ) =
1286.0
(2.29)
0.642
(4.54)
0.251
(2.22)
US & UK General
Non-switching
model
13.139
(1.29)
-0.001
(0.058)
0.140
-0.093
(1.85)
(0.47)
-0.020
-0.013
(0.50)
(0.34)
-0.115
-0.080
(3.20)
(2.20)
0.048
0.027
(3.29)
(1.75)
0.306
(5.04)
-1.928
(2.80)
1153.5
(3.01)
0.647
(5.49)
0.230
(2.41)
866.0
(4.69)
0.687
(4.87)
0.147
(2.08)
US & UK General
switching model
0.168
(1.93)
-0.053
(1.43)
-0.110
(3.07)
0.056
(3.94)
13.803
(1.32)
-0.001
(0.06)
-0.102
(0.50)
-0.019
(0.44)
-0.083
(2.08)
0.029
(1.76)
0.292
(4.64)
-2.110
(2.49)
1013.6
(5.30)
0.631
(5.42)
0.359
(3.08)
-0.321
(2.83)
911.8
(4.12)
0.734
(6.29)
0.191
(2.49)
-0.110
(1.28)
Rt +1
Table 5a
Estimates of the combined model of the FOREX excess return
The excess return equation in the multivariate GARCH in mean model
Normal distribution
Dependent
Variable
US
UK
constant
Vt ( Rt +1 )
-0.0004
0.0004
Ct ( Rt +1 , f t +1 st +1 )
0.133
(0.94)
-0.114
(0.76)
0.033
(2.43)
-0.121
(0.92)
-0.039
(0.34)
Ct ( Rt +1 , itus+1 )
Ct ( Rt +1 , ctus+1 )
Ct ( Rt +1 , ctuk+1 )
-0.022
(2.63)
Ct ( Rt +1 , ptus+1 )
0.179
(0.91)
Ct ( Rt +1 , ptuk+1 )
-0.037
(0.84)
Ct ( Rt +1 , mtus+1 )
-0.087
(0.53)
Ct ( Rt +1 , mtuk+1 )
-0.027
(0.52)
-0.093
(1.89)
Ct ( Rt +1 , ytus+1 )
0.063
(3.23)
Ct ( Rt +1 , ytuk+1 )
Rt
f t st
Conditional variance
Constant
1236.3
(3.34)
0.600
(4.45)
0.274
(2.86)
t2 ( Rt +1 )
t2
t2
Notes: 1. Dependent variable is
2. Ct ( xt +1 , yt +1 ) =
1163.0
(3.22)
0.612
(5.09)
0.270
(2.79)
US & UK General
Non-switching
model
8.806
(0.48)
-0.006
(0.31)
-0.182
-0.300
(1.15)
(1.47)
-0.011
0.200
(0.08)
(1.51)
0.023
0.016
(1.64)
(0.97)
-0.030
-0.028
(4.44)
(2.90)
-0.043
-0.312
(0.22)
(1.51)
0.222
0.129
(1.47)
(0.61)
-0.124
-0.022
(0.70)
(0.072)
-0.018
0.010
(0.35)
(0.186)
-0.208
-0.105
(3.22)
(1.42)
0.070
0.059
(4.33)
(3.26)
0.300
(4.80)
-1.775
(2.61)
1166.2
(2.82)
0.538
(4.13)
0.324
(2.70)
867.8
(4.89)
0.634
(4.46)
0.190
(2.30)
US & UK General
switching model
-0.143
(0.91)
-0.058
(0.45)
0.019
(1.35)
-0.025
(2.98)
0.031
(0.16)
-0.018
(0.12)
0.090
(0.51)
-0.029
(0.58)
-0.131
(2.18)
0.095
(6.34)
10.159
(0.59)
-0.005
(0.25)
-0.277
(1.41)
0.194
(1.47)
0.017
(1.07)
-0.028
(3.24)
-0.310
(1.57)
0.131
(0.64)
-0.057
(0.20)
0.009
(0.16)
-0.107
(1.52)
0.059
(3.34)
0.310
(4.85)
-1.657
(2.55)
904.1
(5.70)
0.658
(9.38)
0.332
(4.73)
-0.293
(2.62)
726.1
(3.02)
0.628
(4.60)
0.173
(2.10)
0.078
(0.57)
Rt +1
Table 5b
Estimates of the combined model of the FOREX excess return
The excess return equation in the multivariate GARCH in mean model
t-distribution
Dependent
Variable
US
UK
Vt ( Rt +1 )
-0.0004
0.0004
Ct ( Rt +1 , f t +1 st +1 )
0.152
(1.18)
-0.129
(0.99)
0.028
(2.43)
-0.077
(0.58)
-0.088
(0.77)
Constant
Ct ( Rt +1 , itus+1 )
Ct ( Rt +1 , ctus+1 )
Ct ( Rt +1 , ctuk+1 )
-0.025
(2.98)
Ct ( Rt +1 , ptus+1 )
0.272
(1.70)
Ct ( Rt +1 , ptuk+1 )
-0.009
(0.20)
Ct ( Rt +1 , mtus+1 )
-0.031
(0.24)
Ct ( Rt +1 , mtuk+1 )
-0.036
(0.71)
-0.136
(3.00)
Ct ( Rt +1 , ytus+1 )
0.056
(3.36)
Ct ( Rt +1 , ytuk+1 )
Rt
f t st
Conditional variance
Constant
1184.3
(2.84)
0.629
(3.99)
0.241
(2.18)
t2 ( Rt +1 )
t2
t2
Notes: 1. Dependent variable is
2. Ct ( xt +1 , yt +1 ) =
1166.2
(2.48)
0.626
(4.58)
0.261
(2.34)
US & UK General
Non-switching model
0.644
(0.037)
-0.019
(1.09)
-0.159
-0.382
(1.02)
(2.00)
0.009
0.234
(0.07)
(1.76)
0.023
0.016
(1.55)
(0.98)
-0.033
-0.035
(4.03)
(3.10)
0.026
-0.162
(0.14)
(0.85)
0.132
0.091
(1.26)
(0.63)
-0.051
0.135
(0.38)
(0.64)
-0.002
0.049
(0.03)
(0.89)
-0.177
-0.105
(3.47)
(2.04)
0.064
0.053
(4.10)
(2.92)
0.273
(4.63)
-2.511
(3.69)
1087.5
(2.95)
0.580
(4.56)
0.281
(2.49)
764.9
(5.92)
0.644
(4.38)
0.138
(2.01)
US & UK General
switching model
0.556
(0.04)
-0.019
(1.17)
-0.071
-0.391
(0.46)
(2.11)
-0.049
0.237
(0.38)
(1.82)
0.023
0.016
(1.62)
(1.01)
-0.027
-0.036
(2.98)
(3.29)
0.074
-0.165
(0.41)
(0.87)
0.040
0.096
(0.38)
(0.69)
0.038
0.138
(0.30)
(0.72)
-0.027
0.049
(0.53)
(0.91)
-0.150
-0.107
(3.07)
(2.10)
0.071
0.054
(4.57)
(2.91)
0.277
(4.23)
-2.483
(3.53)
983.8
(4.37)
0.640
(8.50)
0.350
(4.64)
-0.259
(2.23)
Rt +1
733.9
(3.78)
0.643
(4.40)
0.131
(1.66)
0.017
(0.18)