IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

The Euro exchange rate efficiency and risk premium:an ecm model

Listed author(s):
  • Oreste Napolitano*
  • martin sola


  • fabio spagnolod

The purpose of this work is to investigate the efficiency of the current Euro spot and current forward exchange rates. Within the past three decades there have been large movements in the exchange rate markets and often these movements were not related with the changes in the “fundamentals” of the economy. On the other hand, the exchange rate market efficiency implies that, if the market is efficient, there is no remaining ex ante opportunities for making profits through speculation. Hence, testing for efficiency involves the joint hypothesis of a specific risk premium and rationality. We analysed the relationship between spot and forward rates of the Euro against the British pound and the US dollar. For one of the two exchange rates (EU/UK), we reject the hypothesis of efficiency and a further analysis on the presence of a risk premium shows that it is consistent and time varying.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Economics and Finance Section, School of Social Sciences, Brunel University in its series Public Policy Discussion Papers with number 02-14.

in new window

Length: 12 pages
Date of creation: May 2002
Handle: RePEc:bru:bruppp:02-14
Contact details of provider: Postal:
Brunel University, Uxbridge, Middlesex UB8 3PH, UK

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:bru:bruppp:02-14. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John.Hunter)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.