Tests of Rational Expectations and No Risk Premium in Forward Exchange Markats
This paper tests the hypothesis that traders have rational expeatations and charge no risk premium in the forward exchange market. It uses a statistical procedure which is consistent under a large class of heteroscedasticity, and a set of data which takes into account the institutional features of the forward exchange market. The results show that inferences using this procedure are very different from those using the standard assumption of homoscedasticity.
|Date of creation:||Jan 1982|
|Date of revision:|
|Publication status:||published as Hournal of Interlational Economics, Vol. 12, no.1/2 (1984): 173-184.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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"Money, bonds and foreign exchange,"
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2013/11356, ULB -- Universite Libre de Bruxelles.
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- 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 829-53, October.
- 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.
- 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.
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