Title: On the informational content of spot and forward exchange rates
Abstract: In foreign exchange markets, efficiency tests have typically been applied to the forward rate on the argument that the forward rate should be a good proxy for the unobservable market expectations of future spot rates. The present study offers innovations in two directions. First we utilize a data set which consists of daily observations on spot and forward exchange rates. This allows us to match the forward contract with the exact settlement date and to create a large number of non-overlapping data sets. Second, and more importantly, we show that in general the current spot rate is a ‘better’ predictor of the future spot rate than is the current forward rate of appropriate maturity.
Publication Year: 1988
Publication Date: 1988-09-01
Language: en
Type: article
Indexed In: ['crossref']
Access and Citation
Cited By Count: 14
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