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Risk Premia in Foreign Currency Futures

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  • Liu, Christina Y
  • He, Jia

Abstract

This paper tests the uncorrelatedness of increments of daily foreign currency futures prices and derives implications for risk premia based on a heteroscedasticity-robust variance ratio test. There is evidence suggesting the existence of a time-varying risk premia. Moreover, the results suggest that currency futures price is not an unbiased predictor of currency spot price on corresponding maturity date of currency futures contract. The paper also applies a heteroscedasticity-adjusted Box-Pierce Q test to the same data set for comparison. Copyright 1992 by MIT Press.

Suggested Citation

  • Liu, Christina Y & He, Jia, 1992. "Risk Premia in Foreign Currency Futures," The Financial Review, Eastern Finance Association, vol. 27(4), pages 571-587, November.
    • Handle: RePEc:bla:finrev:v:27:y:1992:i:4:p:571-87
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    Cited by:

    1. Aroskar, Raj & Sarkar, Salil K. & Swanson, Peggy E., 2004. "European foreign exchange market efficiency: Evidence based on crisis and noncrisis periods," International Review of Financial Analysis, Elsevier, vol. 13(3), pages 333-347.
    2. Ser‐Huang Poon, 1996. "Persistence and mean reversion in UK stock returns," European Financial Management, European Financial Management Association, vol. 2(2), pages 169-196, July.

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