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7701495856003801572856003701610w15866NBER20150422003027.0150
422s2010 mau||||fs|||| 000 0 eng d1 aBurnside,
Craig.10aInvestor Overconfidence and the Forward Premium
Puzzleh[electronic resource] /cCraig Burnside, Bing Han, David
Hirshleifer, Tracy Yue Wang. aCambridge, Mass.bNational
Bureau of Economic Researchc2010.1 aNBER working paper
seriesvno. w15866 aApril 2010.3 aWe offer an explanation
for the forward premium puzzle in foreign exchange markets based
upon investor overconfidence. In the model, overconfident
individuals overreact to their information about future
inflation, which causes greater overshooting in the forward rate
than in the spot rate. Thus, when agents observe a signal of
higher future inflation, the consequent rise in