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Forward Rate Unbiasedness Hypothesis in the Tunisian Exchange Rate Market

Author

Listed:
  • Dhekra Azouzi

    () (Tunis El Manar University)

  • Rohit Vishal Kumar

    () (Xavier Institute of Social Service)

  • Chaker Aloui

    (Tunis El Manar University)

Abstract

Based on a linear framework, this paper aims to examine the relationship between future spot rates and forward exchange rates using USD-TND data, thanks to traditional regressions and to the Vector Error Correction Model (VECM) in order to check if the Unbiasedness Forward Exchange Rate (UFER) hypothesis is satisfied and if the forward premiums contain valuable information useful to forecast the subsequent path that will be taken by spot exchange rates. The empirical analysis reveals that the UFER hypothesis is rejected and that the forward premium is a crucial tool, at short term, to detect the future movements of spot exchange rates. A potential enrichment of such a paper will rely on a non linear framework.

Suggested Citation

  • Dhekra Azouzi & Rohit Vishal Kumar & Chaker Aloui, 2011. "Forward Rate Unbiasedness Hypothesis in the Tunisian Exchange Rate Market," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 1(2), pages 17-44, July.
  • Handle: RePEc:hur:ijarbs:v:1:y:2011:i:2:p:17-44
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Yutaka Kurihara, 2016. "Effectiveness of the Zero Interest Rate Policy for Financial Markets in Japan: Principal Components Analysis," Applied Economics and Finance, Redfame publishing, vol. 3(3), pages 103-111, August.
    2. repec:rmk:rmkbae:v:2:y:2014:i:2:p:1-9 is not listed on IDEAS
    3. Yutaka Kurihara, 2015. "Are Japanese Stock Prices Important Deterministic Elements of Exchange Rate Returns?," Bulletin of Applied Economics, Risk Market Journals, vol. 2(2), pages 1-9.
    4. 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.

    More about this item

    Keywords

    UFER hypothesis; cointegration; VECM; Tunisia;

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