Several Econometric Tests of Exchange Rate Efficiency for a Few European Countries

Gilda M. Agacer, Augustine C. Arize, Ioannis N. Kallianiotis, Krishna M. Kasibhatla, John Malindretos

Abstract


This paper uses an efficiency specification model of the spot and forward foreign exchange markets and tests the hypotheses for random walk (which cannot be rejected), general efficiency, and unbiasedness by using a regression estimation and various specification and diagnostic tests for the series and the error terms (residuals). Whereas the forward rate is usually viewed as an unbiased predictor of the future spot rate, the unbiased forward rate hypothesis has failed to be rejected for the Canadian dollar, although more research is needed in this particular area so that better statistical inferences can be drawn in the future.

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DOI: https://doi.org/10.5430/ijfr.v6n4p194



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International Journal of Financial Research
ISSN 1923-4023(Print)ISSN 1923-4031(Online)

 

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