A re-examination of the unbiasedness forward rate hypothesis using dynamic SUR model

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Abstract

This paper augments the empirical literature by testing the unbiasedness hypothesis of the U.S. foreign exchange market in a panel-based framework. Specifically, the dynamic seemingly unrelated estimator (Mark, Ogaki, & Sul, 2000) is applied to test parameter restrictions and cointegration, in additional to accounting for the cross-currency dependence. Evidence from daily data of 17 currencies indicates that although cointegration is confirmed, both the tests of parameter restrictions and the presence of serial correlation do not favor the unbiasedness hypothesis satisfactorily.

Original languageEnglish
Pages (from-to)542-559
Number of pages18
JournalQuarterly Review of Economics and Finance
Volume43
Issue number3
DOIs
Publication statusPublished - 2003
Externally publishedYes

Keywords

  • Dynamic SUR
  • Multivariate cointegration
  • Unbiasedness

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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