Tests of Rational Expectations and No Risk Premium in Forward Exchange Markats

20 Pages Posted: 26 May 2009 Last revised: 26 Oct 2022

See all articles by David A. Hsieh

David A. Hsieh

Duke University - Fuqua School of Business; Duke University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: 1982

Abstract

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.

Suggested Citation

Hsieh, David Arthur, Tests of Rational Expectations and No Risk Premium in Forward Exchange Markats (1982). NBER Working Paper No. w0843, Available at SSRN: https://ssrn.com/abstract=1408891

David Arthur Hsieh (Contact Author)

Duke University - Fuqua School of Business ( email )

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