The Unbiasedness Hypothesis in the Forward Foreign Exchange Market: A Specification Analysis with Application to France, Italy, Japan, the United Kingdom and West Germany
17 Pages Posted: 1 Mar 2012
Date Written: 1986
Abstract
The purpose of this paper is to carry out a specification analysis of a test relation for the unbiasedness hypothesis using thirty-day forward foreign exchange data from France, Italy, Japan, the United Kingdom, and West Germany. The results indicate that econometric problems do exist for each country's test equation over the entire sample. For each country, there is at least one period which admits a statistically adequate regression equation. Results for these periods show that the null hypothesis of the unbiasedness of the forward rate is rejected for some countries but is retained for others.
Keywords: specfication analyses, unbiasedness hypothesis, forward foreign exchange rate
JEL Classification: C22, C52, F31
Suggested Citation: Suggested Citation