On the unbiasedness of the forward rate in the Singapore foreign exchange market

Wee-Beng Gan and Lee-Ying Soon

Applied Financial Economics, 1997, vol. 7, issue 4, 413-417

Abstract: This paper evaluates the extent to which the forward exchange rate serves as an 'unbiased' predictor of the future spot rate, premised on a framework that is independent of the assumption of risk neutrality and rational expectation. The results show that daily Singapore Dollar/US Dollar spot and forward exchange rates are cointegrated and the estimated cointegrating vectors satisfy the unbiased forward rate hypothesis restriction.

Date: 1997
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DOI: 10.1080/096031097333529

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