Measuring the risk premium in uncovered interest parity using the component GARCH-M model

► This study tests for a risk premium in uncovered interest parity (UIP). ► A component GARCH in mean model is used with both developed and emerging countries. ► The results provide evidence of a significant risk premium in most countries. ► Mostly the implicit restrictions of the UIP model still do not hold. ► In general UIP works better in emerging countries than the developed ones.