# The World-Wide Fama Puzzle Reversal

In my previous post, I recounted “The New Fama Puzzle” as it applied to dollar exchange rates, with focus on the euro/dollar rate. A quick observation: the reversal also appears for non-US dollar based exchange rates (against euro, yen, pound).

The Fama regression is:

s+1 – s = α’ + β'(i-i*) + error

First, consider Fama regression coefficients (β’) for the one year horizon, up to 2007M08, against the US dollar, yen, euro, and pound.

Figure 1: Fama regression coefficients for various currency pairs, up to 2007M08. Source: BCFH (2018).

Now, consider the corresponding Fama regression coefficients, after 2007M09.

Figure 2: Fama regression coefficients for various currency pairs, after to 2007M09. Source: BCFH (2018).

It might not be clear from Figure 1, but almost all the estimates are negative. In Figure 2, they are almost all positive.

Here’s the table that underpins the figures.

Table 1: Fama regression coefficients for various currency pairs, for various sample periods. Source: BCFH (2018) Appendix Table 1.

## 5 thoughts on “The World-Wide Fama Puzzle Reversal”

1. Moses Herzog

@Menzie
You know, I can almost 100% predict you are going to get complaints about Figure 1 (from the usual parties?? CoRev, are you out there??), but those complaints will not be from me. If you can kind of “trick” your mind into looking at the bar chart “in 3D” it is actually a great little bar chart that packs a wallop of info in one visual cue. But I do think looking at the “Fama Puzzle” “from the other side of the mirror” so to speak, adds some insight and extra prospective, and helps people like myself grasp Fama Puzzle a little better.

Thanks for this Menzie.

2. Moses Herzog

Menzie is generous with allowing (often times false, in fact, I would say about 98% of the time false) criticisms of himself. And Menzie is very gracious in allowing my own yammering. So I’m hoping he’ll allow me one more yammering here. This is something that really needs to be said, really especially in the last 2 weeks but maybe even longer than that. LATELY a common refrain of Trump and his cadre of lapdogs has been “Why didn’t President Obama do anything about the ‘Russian meddling’ “. But the fact is President Obama DID do something. He EXPELLED a boatload of Russian diplomats. 35 to be exact. Along with other things “out of the public eye” (defensive state hacking etc, as a punitive action) Which President Obama didn’t see the need to “advertise”. What happened when President Obama did that?? He was criticized. Both pathological liar Hillary and ladyparts molesting Trump said they wanted a “reset” with Russia. This isn’t “fake news”. It’s ON RECORD, in fact there is video of this. LONG before Trump started shaming our nation with porn girl payoffs and all the rest.

https://www.nytimes.com/2016/12/29/us/politics/russia-election-hacking-sanctions.html

There were also steps President Obama took to punish Putin’s friends and Russia on the internationally illegal invasion of Crimea on Ukraine soil. The same country BTW, where Trumps’s campaign manager and “good buddy” Paul Manafort had been playing around for YEARS, and taking payments to further corrupt what was going on in the Ukraine power center of Kiev. Check the dates on the articles:
https://www.nytimes.com/2014/03/21/us/politics/us-expanding-sanctions-against-russia-over-ukraine.html

Also, the video above, in the very first link, may even be “cathartic” for those of you who still have a fully-functioning brain, because it’s the last time we had an articulate man leading our nation. The video might remind you of that time, which now seems like it was 15 F’ing years ago.

At this point, I could put up about 40+ articles up connecting Paul Manafort and Carter Page to Trump. I could also use a sledgehammer to try to get an idea into some Republican’s heads—a lot of good it would do me.

1. ilsm

“Fully functioning brain” which deplorables obviously cannot achieve. Not needed to gaslight your [Duane] Gish gallop, proof by verbosity.

We have always been at war with Putin.

Cite more disjointed liberal empire selling media ranting?