Rational expectations, risk premia, and the market for spot and forward exchange

Rational expectations (Economic theory)

The Orbiter Stability Experiment on STS-40

The Orbiter Stability Experiment (OSE) was developed to evaluate the steadiness of the STS Orbiter as a potential platform for instrumentation that would image the Sun in its extreme ultraviolet and soft X-ray radiations. We were interested in any high frequency motions of the Orbiter's orientation due to normal operations and manned activities. Preliminary results are presented of the observations. Other than the expected slow motion of the Orbiter within the specified angular deadband of 0.1 degrees during the observations, it was found that high frequency (above 1 Hz) angular motions (jitter) were not detectable at the 0.25 arc sec detection limit of the most sensitive detector, for most of the period of observation. No high frequency motions were recorded during intervals that were identified with vernier thruster firings. However, one short interval with detectable spectral power to a frequency of 10 Hz has been found to date. It has not yet been correlated with a particular activity going on at the time. The results of the observations may also be of value in assessing perturbations to the Orbiter's micro-gravity environment produced by normal operations

House Market in Chinese Cities: Dynamic Modeling, In-Sampling Fitting and Out-of-Sample Forecasting

This paper attempts to contribute in several ways. Theoretically, it proposes simple models of house price dynamics and construction dynamics, all based on forward-looking agents’ maximization problems, which may carry independent interests. Simplified version of the model implications are estimated with the data from four major cities in China. Both price and construction dynamics exhibit strong persistence in al cities. Significant heterogeneity across cities is found. Our models out-perform widely used alternatives in in-sample-fitting for all cities, although similar success only limited to highly developed cities in out-of-sample forecasting. Policy implications and future research directions are also discussed

Determinants of Currency Risk Premiums

The risk premium is a function of both the interest rate differential and the gap between the current exchange rate and its long-run equilibrium in a model of the foreign exchange market with both non-speculating traders and rational speculators. If the speculators have an alternative to specializing in exchange-rate speculation, then there should be no presumption that uncovered interest rate parity will hold even approximately with a long-run equilibrium number of speculators. Furthermore, when other traders respond to interest-rate differentials, the model can give rise to a negative relationship between the interest-rate differential and the subsequent change in the exchange rate, a phenomenon that is often evident in foreign exchange markets