If we regress the rate of appreciation on the forward premium

St+1 St Ft St = a + B +E St St We will find that the slope coefficient B is not exactly one. We then know that the forward expectation parity does not hold well in reality. Now, let's write the rate of appreciation as the forward premium plus a remaining term. What does a negative imply about the variance of the remaining term relative to variance of rate of appreciation? St+1 St Ft St = a + B +E St St We will find that the slope coefficient B is not exactly one. We then know that the forward expectation parity does not hold well in reality. Now, let's write the rate of appreciation as the forward premium plus a remaining term. What does a negative imply about the variance of the remaining term relative to variance of rate of appreciation