Some Evidence on the Efficiency of the Forward Market for Foreign Exchange from Monte-Carlo Experiments

Bibliographic Data

ID9707072
AuthorsJoachim Zietz (0000-0001-8874-5370, Middle Tennessee State University, corresponding author)
Year1995
Volume105
Issue433
Pages1471
Publication date1995-11-01
Open AccessNo
TypeARTICLE
VenueThe Economic Journal (JOURNAL)
Journal identifiersISSN: 0013-0133 • E-ISSN: 1468-0297
PublisherOxford University Press (OUP) (PUBLISHER)
DOI10.2307/2235111
OpenAlexW2056558788
LanguageEN
References cited9

A Monte-Carlo approach is used to provide new insights into tests of the forward foreign exchange market efficiency hypothesis (FMEH). A whole range of alternative hypotheses regarding price determination in the forward market is examined for the /DM case, including different expectations schemes, a risk premium model derived from international asset pricing theory and the novel idea that the empirical evidence on the FMEH is the result of intervention by monetary authorities. The latter hypothesis as well as the hypothesis that expectations are formed in a static manner rather than rational appear to work the best

Asset (computer security · Capital asset pricing model · Econometrics · Economics · Efficient-market hypothesis · Empirical evidence · Financial economics · Foreign exchange · Foreign exchange market · Forward price · Microeconomics · Monetary economics · Monte Carlo method · Range (aeronautics · Rational expectations · Statistics · Computer Science · Economic theories and models · Financial Markets and Investment Strategies · Mathematics · Monetary Policy and Economic Impact

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