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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- Roll, Richard & Solnik, Bruno, 1977. "A pure foreign exchange asset pricing model," Journal of International Economics, Elsevier, vol. 7(2), pages 161-179, May.
- 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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"Money, bonds and foreign exchange,"
ULB Institutional Repository
2013/11356, ULB -- Universite Libre de Bruxelles.
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- Frankel, Jeffrey A., 1979. "The diversifiability of exchange risk," Journal of International Economics, Elsevier, vol. 9(3), pages 379-393, August.
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- Richard Meese & Kenneth J. Singleton, 1980. "Rational expectations, risk premia, and the market for spot and forward exchange," International Finance Discussion Papers 165, Board of Governors of the Federal Reserve System (U.S.).
- Stulz, ReneM., 1982. "The forward exchange rate and macroeconomics," Journal of International Economics, Elsevier, vol. 12(3-4), pages 285-299, May.
- Frenkel, Jacob A & Levich, Richard M, 1979. "Covered Interest Arbitrage and Unexploited Profits? Reply," Journal of Political Economy, University of Chicago Press, vol. 87(2), pages 418-22, April.
- Geweke, John F & Feige, Edgar L, 1979. "Some Joint Tests of the Efficiency of Markets for Forward Foreign Exchange," The Review of Economics and Statistics, MIT Press, vol. 61(3), pages 334-41, August.
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