IDEAS home Printed from https://ideas.repec.org/a/eee/jimfin/v3y1984i3p357-368.html
   My bibliography  Save this article

Testing the unbiasedness hypothesis in the forward foreign exchange market: A specification analysis

Author

Listed:
  • Gregory, Allan W.
  • McCurdy, Thomas H.

Abstract

No abstract is available for this item.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:jimfin:v:3:y:1984:i:3:p:357-368
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/0261-5606(84)90019-6
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    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. 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.
    3. Hakkio, Craig S, 1981. "Expectations and the Forward Exchange Rate," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 22(3), pages 663-678, October.
    4. Harris, Richard G & Purvis, Douglas D, 1981. "Diverse Information and Market Efficiency in a Monetary Model of the Exchange Rate," Economic Journal, Royal Economic Society, vol. 91(364), pages 829-847, December.
    5. Stein, Jerome L, 1980. "The Dynamics of Spot and Forward Prices in an Efficient Foreign Exchange Market with Rational Expectations," American Economic Review, American Economic Association, vol. 70(4), pages 565-583, September.
    6. Chesher, Andrew, 1983. "The information matrix test : Simplified calculation via a score test interpretation," Economics Letters, Elsevier, vol. 13(1), pages 45-48.
    7. Longworth, David, 1981. "Testing the Efficiency of the Canadian-U.S. Exchange Market under the Assumption of no Risk Premium," Journal of Finance, American Finance Association, vol. 36(1), pages 43-49, March.
    8. Frankel, Jeffrey A., 1982. "In search of the exchange risk premium: A six-currency test assuming mean-variance optimization," Journal of International Money and Finance, Elsevier, vol. 1(1), pages 255-274, January.
    9. White, Halbert, 1982. "Maximum Likelihood Estimation of Misspecified Models," Econometrica, Econometric Society, vol. 50(1), pages 1-25, January.
    10. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    11. Frenkel, Jacob A. & Razin, Assaf, 1980. "Stochastic prices and tests of efficiency of foreign exchange markets," Economics Letters, Elsevier, vol. 6(2), pages 165-170.
    12. Harris, Richard G. & Purvis, Douglas D., 1982. "Incomplete information and the equilibrium determination of the forward exchange rate," Journal of International Money and Finance, Elsevier, vol. 1(1), pages 241-253, January.
    13. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    14. Adrian R Pagan & Anthony D Hall, 1983. "Diagnostic tests as residual analysis," Published Paper Series 1983-1, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    15. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
    16. Godfrey, Leslie G, 1978. "Testing for Higher Order Serial Correlation in Regression Equations When the Regressors Include Lagged Dependent Variables," Econometrica, Econometric Society, vol. 46(6), pages 1303-1310, November.
    17. Chesher, Andrew D, 1984. "Testing for Neglected Heterogeneity," Econometrica, Econometric Society, vol. 52(4), pages 865-872, July.
    18. Bray, Margaret M, 1981. "Futures Trading, Rational Expectations, and the Efficient Markets Hypothesis," Econometrica, Econometric Society, vol. 49(3), pages 575-596, May.
    19. 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.
    20. Grossman, Sanford J, 1976. "On the Efficiency of Competitive Stock Markets Where Trades Have Diverse Information," Journal of Finance, American Finance Association, vol. 31(2), pages 573-585, May.
    21. 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.
    22. Lars Peter Hansen & Robert J. Hodrick, 1983. "Risk Averse Speculation in the Forward Foreign Exchange Market: An Econometric Analysis of Linear Models," NBER Chapters, in: Exchange Rates and International Macroeconomics, pages 113-152, National Bureau of Economic Research, Inc.
    23. 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.
    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. 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.
    2. Frankel, Jeffrey A., 1986. "The implications of mean-variance optimization for four questions in international macroeconomics," Journal of International Money and Finance, Elsevier, vol. 5(1, Supple), pages 53-75, March.
    3. Richard H. Clarida & Mark P. Taylor, 1993. "The Term Structure of Forward Exchange Premia and the Forecastibility of Spot Exchange Rates: Correcting the Errors," NBER Working Papers 4442, National Bureau of Economic Research, Inc.
    4. Raj Aggarwal & Brian M. Lucey & Sunil K. Mohanty, 2006. "The Forward Exchange Rate Bias Puzzle: Evidence from New Cointegration Tests," The Institute for International Integration Studies Discussion Paper Series iiisdp123, IIIS.
    5. Villanueva, O. Miguel, 2007. "Spot-forward cointegration, structural breaks and FX market unbiasedness," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 17(1), pages 58-78, February.
    6. Richard H. Clarida & Mark P. Taylor, 1997. "The Term Structure Of Forward Exchange Premiums And The Forecastability Of Spot Exchange Rates: Correcting The Errors," The Review of Economics and Statistics, MIT Press, vol. 79(3), pages 353-361, August.
    7. Ito, Takatoshi, 1988. "Use of (Time-Domain) Vector Autoregressions to Test Uncovered Interest Parity," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 296-305, May.
    8. Thomas Chiang & Thomas Hindelang, 1988. "Forward rate, spot rate and risk premium: An empirical analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 124(1), pages 74-88, March.
    9. Raj Aggarwal & Winston T. Lin & Sunil K. Mohanty, 2008. "Are Forward Exchange Rates Rational Forecasts of Future Spot Rates? An Improved Econometric Analysis for the Major Currencies," Multinational Finance Journal, Multinational Finance Journal, vol. 12(1-2), pages 1-20, March-Jun.
    10. 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.
    11. Bhatti, Razzaque H., 2014. "The existence of uncovered interest parity in the CIS countries," Economic Modelling, Elsevier, vol. 40(C), pages 227-241.
    12. Kenneth A. Froot & Jeffrey A. Frankel, 1986. "Interpreting Tests of Forward Discount Bias Using Survey Data on Exchange Rate Expectations," NBER Working Papers 1963, National Bureau of Economic Research, Inc.
    13. Phungo, Muka & Bonga-Bonga, Lumengo, 2019. "An analysis of the unbiased forward rate hypothesis in developed and emerging economies," MPRA Paper 92222, University Library of Munich, Germany.
    14. HeeJoon Kang, 1992. "Forward exchange rates as unbiased predictors of future spot rates a review and re-interpretation," Open Economies Review, Springer, vol. 3(2), pages 215-232, June.
    15. Bekaert, Geert & Hodrick, Robert J., 1993. "On biases in the measurement of foreign exchange risk premiums," Journal of International Money and Finance, Elsevier, vol. 12(2), pages 115-138, April.
    16. Gregory, Allan W, 1989. "A Nonparametric Test for Autoregressive Conditional Heteroscedasticity: A Markov-Chain Approach," Journal of Business & Economic Statistics, American Statistical Association, vol. 7(1), pages 107-115, January.
    17. Lars Hörngren & Anders Vredin, 1989. "Exchange risk premia in a currency basket system," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 125(2), pages 311-325, June.
    18. Winston T. Lin & Hong-Jen Lin & Yueh H. Chen, 2002. "The Dynamics and Stochastics of Currency Betas Based on the Unbiasedness Hypothesis in Foreign Exchange Markets," Multinational Finance Journal, Multinational Finance Journal, vol. 6(3-4), pages 167-195, September.
    19. 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.
    20. Thomas C. Chiang, 1986. "Empirical Analysis On The Predictors Of Future Spot Rates," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 9(2), pages 153-162, June.
    21. Wang, Peijie & Jones, Trefor, 2002. "Testing for efficiency and rationality in foreign exchange markets--a review of the literature and research on foreign exchange market efficiency and rationality with comments," Journal of International Money and Finance, Elsevier, vol. 21(2), pages 223-239, April.
    22. Winston T. Lin, 1999. "Dynamic and Stochastic Instability and the Unbiased Forward Rate Hypothesis: A Variable Mean Response Approach," Multinational Finance Journal, Multinational Finance Journal, vol. 3(3), pages 173-221, September.

    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. 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.
    2. 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.
    3. Domowitz, Ian & Hakkio, Craig S., 1985. "Conditional variance and the risk premium in the foreign exchange market," Journal of International Economics, Elsevier, vol. 19(1-2), pages 47-66, August.
    4. McCurdy, Thomas H & Morgan, Ieuan G, 1988. "Testing the Martingale Hypothesis in Deutsche Mark Futures with Models Specifying the Form of Heteroscedasticity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 3(3), pages 187-202, July-Sept.
    5. Robert E. Cumby & Maurice Obstfeld, 1984. "International Interest Rate and Price Level Linkages under Flexible Exchange Rates: A Review of Recent Evidence," NBER Chapters, in: Exchange Rate Theory and Practice, pages 121-152, National Bureau of Economic Research, Inc.
    6. Richard M. Levich, 1983. "Empirical Studies of Exchange Rates: Price Behavior, Rate Determinationand Market Efficiency," NBER Working Papers 1112, National Bureau of Economic Research, Inc.
    7. 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.
    8. Vajanne, Laura, . "The Exchange Rate Under Target Zones," ETLA A, The Research Institute of the Finnish Economy, number 16.
    9. Bekaert, Geert & Hodrick, Robert J., 1993. "On biases in the measurement of foreign exchange risk premiums," Journal of International Money and Finance, Elsevier, vol. 12(2), pages 115-138, April.
    10. Dominguez, Kathryn M., 1986. "Are foreign exchange forecasts rational? : New evidence from survey data," Economics Letters, Elsevier, vol. 21(3), pages 277-281.
    11. Baillie, Richard T. & Kim, Kun Ho, 2015. "Was it risk? Or was it fundamentals? Explaining excess currency returns with kernel smoothed regressions," Journal of Empirical Finance, Elsevier, vol. 34(C), pages 99-111.
    12. Ito, Takatoshi, 1988. "Use of (Time-Domain) Vector Autoregressions to Test Uncovered Interest Parity," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 296-305, May.
    13. 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.
    14. W A Razzak, 1998. "The forward rate unbiasedness hypothesis in inflation-targeting regimes," Reserve Bank of New Zealand Discussion Paper Series G99/3, Reserve Bank of New Zealand, revised Aug 1999.
    15. Tim Bollerslev & Ray Y. Chou & Narayanan Jayaraman & Kenneth F. Kroner - L, 1991. "es modéles ARCH en finance : un point sur la théorie et les résultats empiriques," Annals of Economics and Statistics, GENES, issue 24, pages 1-59.
    16. 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.).
    17. Hu, Xiaoqiang, 1997. "Macroeconomic uncertainty and the risk premium in the foreign exchange market1," Journal of International Money and Finance, Elsevier, vol. 16(5), pages 699-718, September.
    18. 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.
    19. Thomas Chiang & Thomas Hindelang, 1988. "Forward rate, spot rate and risk premium: An empirical analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 124(1), pages 74-88, March.
    20. Frederick Nieuwland & Willem Verschoor & Christian Wolff, 2000. "Exchange risk premia in the European monetary system," Applied Financial Economics, Taylor & Francis Journals, vol. 10(4), pages 351-360.

    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:eee:jimfin:v:3:y:1984:i:3:p:357-368. 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: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30443 .

    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.