The Unbiasedness Hypothesis in the Forward Foreign Exchange Market: A Cross Country Specification Analysis

Allan Gregory and Thomas McCurdy

Working Paper from Economics Department, Queen's University

Abstract: This paper carries out a specification analysis of a test relation for the unbiasedness hypothesis using 30-day forward foreign exchange data from France, Italy, Japan, the United Kingdom, and West Germany. The results indicate that econometric problems exist for each country's test equation. Resolving these problems will probably require explicit modelling of market fundamentals and country-specific institutional details. For each country, there is at least one period which admits a statistically adequate regression equation. Results show the null hypothesis of unbiasedness of the forward rate is rejected for some countries but retained for others.

Pages: 21 pages
Date: 1984
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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:566

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