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Imagine that the forward premium puzzle is entirely explained by expectational errors. What would be the expected (by market participants) and actual average excess return
Imagine that the forward premium puzzle is entirely explained by expectational errors.
What would be the expected (by market participants) and actual average excess return on a carry trade?
Select one:
a.Expected excess return negative, Actual excess return positive
b.Expected excess return zero, Actual excess return zero
c.Expected excess return zero, Actual excess return positive
d.Expected excess return positive, Actual excess return positive
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