Citation

Discussion Paper Details

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Title: Efficiency in the Peseta Forward Exchange Rate Market

Author(s): Juan Ayuso, Juan J. Dolado and Simón Sosvilla-Rivero

Publication Date: February 1992

Keyword(s): Cointegration, Efficient Markets, Exchange Rates and Risk Premiums

Programme Area(s): International Macroeconomics

Abstract: This paper applies recent cointegration techniques to analyse whether the forward market for the peseta/US dollar is efficient in both the one-month and the three-month segments of the market. Under the assumption of rationality, the premiums are small and they suggest a possible linear relationship between the premium and the expiry date of the contract. As a by-product of the analysis, an explanation is offered for the conflicting results which have been obtained in testing forward market efficiency, when such efficiency is tested with series in levels or with the deviations thereof in relation to the current spot rates.

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Bibliographic Reference

Ayuso, J, Dolado, J and Sosvilla-Rivero, S. 1992. 'Efficiency in the Peseta Forward Exchange Rate Market'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=627