Michael G. Arghyrou
Risk aversion, exchange-rate uncertainty, and the law of one price: Insights from the market for online air-travel tickets
Arghyrou, Michael G.; Gregoriou, Andros; Pourpourides, Panayiotis M.
Authors
Andros Gregoriou
Panayiotis M. Pourpourides
Abstract
We argue that risk aversion driven by exchange-rate uncertainty causes a wedge between the domestic and foreign prices of a homogeneous good. We test our hypothesis using a unique micro-data set from a market with minimum imperfections. The empirical findings validate our hypothesis, as accounting for exchange-rate uncertainty we are able to explain a significant proportion of deviations from the law of one price. Overall, our analysis suggests the possibility of a new solution to the purchasing power parity puzzles.© Canadian Economics Association.
Citation
Arghyrou, M. G., Gregoriou, A., & Pourpourides, P. M. (2011). Risk aversion, exchange-rate uncertainty, and the law of one price: Insights from the market for online air-travel tickets. Canadian Journal of Economics / Revue Canadienne d'Économique, 44(3), 880-906. https://doi.org/10.1111/j.1540-5982.2011.01659.x
Journal Article Type | Article |
---|---|
Online Publication Date | Aug 23, 2011 |
Publication Date | Aug 1, 2011 |
Deposit Date | Nov 13, 2014 |
Journal | Canadian Journal Of Economics-Revue Canadienne D Economique |
Print ISSN | 0008-4085 |
Publisher | Wiley |
Peer Reviewed | Peer Reviewed |
Volume | 44 |
Issue | 3 |
Pages | 880-906 |
DOI | https://doi.org/10.1111/j.1540-5982.2011.01659.x |
Keywords | Economics and Econometrics |
Public URL | https://hull-repository.worktribe.com/output/465663 |
Publisher URL | https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1540-5982.2011.01659.x |
Contract Date | Nov 13, 2014 |
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