Testing Rational Expectations and Efficiency in the Foreign Exchange Market
نویسنده
چکیده
Forward and spot exchange rates are modelled as an unrestricted bivariate autoregression from weekly data on the New York foreign exchange market for June, 1973 to April, 1980. The null hypothesis that the forward exchange rate is an unbiased estimate of the corresponding future spot exchange rate is tested by means of a nonlinear Wald test and is rejected for all six currencies considered. The results cast doubt on a central assumption in many current models of exchange rate behavior.
منابع مشابه
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
This paper specifies two VAR models for testing efficiency and expectations in foreign exchange markets. The sufficient conditions for efficiency and rational expectations, by imposing restrictions on the VAR parameters, are derived. Based on these models, issues on testing efficiency and rationality are discussed with reference to previous empirical studies in the area. 2002 Elsevier Science...
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