IDEAS home Printed from https://ideas.repec.org/a/bla/ecorec/v64y1988i1p2-13.html
   My bibliography  Save this article

Speculative Efficiency and the Exchange Rate: Some Evidence Since the Float

Author

Listed:
  • WARREN J. TEASE

Abstract

This paper considers whether the speculative efficiency hypothesis holds in the foreign exchange market since the floating of the Australian dollar in December 1983. For the post‐float period as a whole, the speculative efficiency hypothesis can be rejected in the 30‐day market but not in the 15‐day or 90‐day markets. Evidence of a structural change in the market in February 1985—the time of the first major depreciation ‐ was also found.

Suggested Citation

  • Warren J. Tease, 1988. "Speculative Efficiency and the Exchange Rate: Some Evidence Since the Float," The Economic Record, The Economic Society of Australia, vol. 64(1), pages 2-13, March.
    • Handle: RePEc:bla:ecorec:v:64:y:1988:i:1:p:2-13
    DOI: 10.1111/j.1475-4932.1988.tb02035.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1475-4932.1988.tb02035.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1475-4932.1988.tb02035.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Hodrick, Robert J. & Srivastava, Sanjay, 1984. "An investigation of risk and return in forward foreign exchange," Journal of International Money and Finance, Elsevier, vol. 3(1), pages 5-29, April.
    2. Stephen J. Turnovsky & Katrina M. Ball, 1983. "Covered Interest Parity and Speculative Efficiency: Some Empirical Evidence for Australia," The Economic Record, The Economic Society of Australia, vol. 59(3), pages 271-280, September.
    3. Jeremy J. Siegel, 1972. "Risk, Interest Rates and the Forward Exchange," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 86(2), pages 303-309.
    4. Hansen, Lars Peter & Hodrick, Robert J, 1980. "Forward Exchange Rates as Optimal Predictors of Future Spot Rates: An Econometric Analysis," Journal of Political Economy, University of Chicago Press, vol. 88(5), pages 829-853, October.
    5. Hsieh, David A & Kulatilaka, Nalin, 1982. "Rational Expectations and Risk Premia in Forward Markets: Primary Metals at the London Metals Exchange," Journal of Finance, American Finance Association, vol. 37(5), pages 1199-1207, December.
    6. Cosset, Jean-Claude, 1984. "On the presence of risk premiums in foreign exchange markets," Journal of International Economics, Elsevier, vol. 16(1-2), pages 139-154, February.
    7. Geweke, John F & Feige, Edgar L, 1979. "Some Joint Tests of the Efficiency of Markets for Forward Foreign Exchange," The Review of Economics and Statistics, MIT Press, vol. 61(3), pages 334-341, August.
    8. Korajczyk, Robert A, 1985. "The Pricing of Forward Contracts for Foreign Exchange," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 346-368, April.
    9. Baillie, Richard T & Lippens, Robert E & McMahon, Patrick C, 1983. "Testing Rational Expectations and Efficiency in the Foreign Exchange Market," Econometrica, Econometric Society, vol. 51(3), pages 553-563, May.
    10. Robert G. Trevor & Stephen G. Donald, 1986. "Exchange Rate Regimes and the Volatility of Financial Prices: The Australian Case," RBA Research Discussion Papers rdp8608, Reserve Bank of Australia.
    11. Brown, Bryan W & Maital, Shlomo, 1981. "What Do Economists Know? An Empirical Study of Experts' Expectations," Econometrica, Econometric Society, vol. 49(2), pages 491-504, March.
    12. Bilson, John F O, 1981. "The "Speculative Efficiency" Hypothesis," The Journal of Business, University of Chicago Press, vol. 54(3), pages 435-451, July.
    13. Turnovsky, Stephen J & Ball, Katrina M, 1983. "Covered Interest Parity and Speculative Efficiency: Some Empirical Evidence for Australia," The Economic Record, The Economic Society of Australia, vol. 59(166), pages 271-280, September.
    14. Grauer, Frederick L. A. & Litzenberger, Robert H. & Stehle, Richard E., 1976. "Sharing rules and equilibrium in an international capital market under uncertainty," Journal of Financial Economics, Elsevier, vol. 3(3), pages 233-256, June.
    15. David A. Hsieh, 1982. "Tests of Rational Expectations and No Risk Premium in Forward Exchange Markats," NBER Working Papers 0843, National Bureau of Economic Research, Inc.
    16. Mark, Nelson C., 1985. "On time varying risk premia in the foreign exchange market: An econometric analysis," Journal of Monetary Economics, Elsevier, vol. 16(1), pages 3-18, July.
    17. Trevor, Robert G & Donald, Stephen G, 1986. "Exchange Rate Regimes and the Volatility of Financial Prices: The Australian Case," The Economic Record, The Economic Society of Australia, vol. 0(0), pages 58-66, Supplemen.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. K.F. Wallis, 1992. "On Macroeconomic Policy and Macroeconomic Modeling," Economics Discussion / Working Papers 92-04, The University of Western Australia, Department of Economics.
    2. Kenneth F. Wallis, 1993. "On Macroeconomic Policy and Macroeconometric Models," The Economic Record, The Economic Society of Australia, vol. 69(2), pages 113-130, June.
    3. Adrian Blundell-Wignall & Jerome Fahrer & Alexandra Heath, 1993. "Major Influences on the Australian Dollar Exchange Rate," RBA Annual Conference Volume (Discontinued), in: Adrian Blundell-Wignall (ed.),The Exchange Rate, International Trade and the Balance of Payments, Reserve Bank of Australia.
    4. Warren J. Tease, 1988. "The Expectations Theory of the Term Structure of Interest Rates in Australia," The Economic Record, The Economic Society of Australia, vol. 64(2), pages 120-127, June.
    5. Bruce Felmincham & Peter Mansfield, 1997. "Rationality and the Risk Premium on the Australian dollar," International Economic Journal, Taylor & Francis Journals, vol. 11(3), pages 47-59.
    6. Arusha Cooray, 2003. "Financial integration: some evidence from Australia," Applied Economics Letters, Taylor & Francis Journals, vol. 10(15), pages 959-966.
    7. S.P.G. Teo, 1990. "The Efficiency of the Australian Foreign Exchange Market," Economics Discussion / Working Papers 90-25, The University of Western Australia, Department of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ross Levine, 1988. "The forward exchange rate bias: a new explanation," International Finance Discussion Papers 338, Board of Governors of the Federal Reserve System (U.S.).
    2. Brenner, Robin J. & Kroner, Kenneth F., 1995. "Arbitrage, Cointegration, and Testing the Unbiasedness Hypothesis in Financial Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 30(1), pages 23-42, March.
    3. Gregory, Allan W. & McCurdy, Thomas H., 1986. "The unbiasedness hypothesis in the forward foreign exchange market: A specification analysis with application to France, Italy, Japan, the United Kingdom and West Germany," European Economic Review, Elsevier, vol. 30(2), pages 365-381, April.
    4. Levine, Ross, 1989. "An International Arbitrage Pricing Model with PPP Deviations," Economic Inquiry, Western Economic Association International, vol. 27(4), pages 587-599, October.
    5. Engel, Charles, 1996. "The forward discount anomaly and the risk premium: A survey of recent evidence," Journal of Empirical Finance, Elsevier, vol. 3(2), pages 123-192, June.
    6. Gregory, Allan W. & McCurdy, Thomas H., 1984. "Testing the unbiasedness hypothesis in the forward foreign exchange market: A specification analysis," Journal of International Money and Finance, Elsevier, vol. 3(3), pages 357-368, December.
    7. Sonia Pangusión Espinosa., "undated". "Testing Uncovered Interest Rate Parity: The Spanish case," Studies on the Spanish Economy 128, FEDEA.
    8. Fabio Canova & Takatoshi Ito, 1988. "On Time-Series Properties of Time-Varying Risk Premium in the Yen/Dollar Exchange Market," NBER Working Papers 2678, National Bureau of Economic Research, Inc.
    9. Karen K. Lewis, 2011. "Global Asset Pricing," Annual Review of Financial Economics, Annual Reviews, vol. 3(1), pages 435-466, December.
    10. Campbell, John Y. & Clarida, Richard H., 1987. "The term structure of euromarket interest rates : An empirical investigation," Journal of Monetary Economics, Elsevier, vol. 19(1), pages 25-44, January.
    11. Barry A. Goss & S. Gulay Avsar, 2016. "Can Economists Forecast Exchange Rates? The Debate Re-Visited: The Case of the USD/GBP Market," Australian Economic Papers, Wiley Blackwell, vol. 55(1), pages 14-28, March.
    12. S.P.G. Teo, 1990. "The Efficiency of the Australian Foreign Exchange Market," Economics Discussion / Working Papers 90-25, The University of Western Australia, Department of Economics.
    13. Peggy Swanson, 1998. "Spot and forward exchange rates as predictors of future spot rates: trends in exchange market value and the contribution of new information," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 22(2), pages 129-138, June.
    14. Lindsay I. Hogan, 1986. "A Comparison of Alternative Exchange Rate Forecasting Models," The Economic Record, The Economic Society of Australia, vol. 62(2), pages 215-223, June.
    15. Simpson, Marc W. & Grossmann, Axel, 2014. "An examination of the forward prediction error of U.S. dollar exchange rates and how they are related to bid-ask spreads, purchasing power parity disequilibria, and forward premium asymmetry," The North American Journal of Economics and Finance, Elsevier, vol. 28(C), pages 221-238.
    16. Bhatti, Razzaque H., 2014. "The existence of uncovered interest parity in the CIS countries," Economic Modelling, Elsevier, vol. 40(C), pages 227-241.
    17. Hodrick, Robert J. & Srivastava, Sanjay, 1987. "Foreign currency futures," Journal of International Economics, Elsevier, vol. 22(1-2), pages 1-24, February.
    18. Shyh-Wei Chen, 2010. "Testing the hypothesis of market efficiency in the Taiwan-US forward exchange market since 1990," Applied Economics, Taylor & Francis Journals, vol. 42(1), pages 121-132.
    19. Christian Wolff, 2000. "Forward foreign exchange rates and expected future spot rates," Applied Financial Economics, Taylor & Francis Journals, vol. 10(4), pages 371-377.
    20. Tai, Chu-Sheng, 2003. "Can currency risk be a source of risk premium in explaining forward premium puzzle?: Evidence from Asia-Pacific forward exchange markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 13(4), pages 291-311, October.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ecorec:v:64:y:1988:i:1:p:2-13. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/esausea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.