Article ID: | iaor20073773 |
Country: | Greece |
Volume: | 6 |
Issue: | 2 |
Publication Date: | May 2006 |
Journal: | Operational Research - An International Journal |
Authors: | Kenourgios Dimitris, Samitas Aristeidis, Christodoulou Andreas |
Keywords: | economics |
This study tests the market efficiency hypothesis through the cointegration methodology using forward rates and spot exchange rates of different maturities for the British Pound, the Japanese Yen, and the German Mark exchange market against the USA Dollar. Results indicate that the foreign exchange market is efficient in the long run but we reject the Forward Rate Unbiasedness Hypothesis in the short run, and as a result the spot rate is not an unbiased forecast of the forward rate. These results have significant implications for the government policy makers and these currencies' foreign exchange markets.