Tests of Rational Expectations and No Risk Premium in Forward Exchange Markats
Working Paper 0843
DOI 10.3386/w0843
Issue Date
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.
Published Versions
Hournal of Interlational Economics, Vol. 12, no.1/2 (1984): 173-184.