Tests of the Martingale Hypothesis for Foreign Currency Futures with Time-Varying Volatility
AbstractThis paper tests the martingale hypothesis for daily and weekly rates of change of futures prices for five currencies. Daily data suggests evidence against the null for each currency. Trading day effects in foreign currency futures and spot prices introduce complicated day of the week patterns in futures prices. For this reason, we retest the martingale hypothesis using weekly data and reject the null for only one currency. For this currency, one interpretation is that of a time-varying risk premium.
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Bibliographic InfoPaper provided by Queen's University, Department of Economics in its series Working Papers with number 663.
Length: 32 pages
Date of creation: 1986
Date of revision:
Other versions of this item:
- McCurdy, Thomas H. & Morgan, Ieuan G., 1987. "Tests of the martingale hypothesis for foreign currency futures with time-varying volatility," International Journal of Forecasting, Elsevier, vol. 3(1), pages 131-148.
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