Skip to main content
SpringerLink
Log in
Book cover

Exchange Rate Modelling pp 9–48Cite as

Spot and Forward Market Relationships

  • Chapter

  • 231 Accesses

Part of the book series: Advanced Studies in Theoretical and Applied Econometrics ((ASTA,volume 37))

Abstract

This chapter examines in some detail the behaviour of spot and forward exchange rates. We show that combining covered interest parity (CIP) with the common and seemingly innocuous assumptions of rational expectations and risk neutrality quickly results in powerful conclusions regarding the relationship between spot and forward rates. This combination os usually interpreted as a joint hypothesis (of an arbitrage condition and expectations formation). Nevertheless, empirical evidence detailed in section 2.1 shows that these conclusions are rejected by the vast majority of researchers. Subsequent sections present theoretical and empirical tests of each of the building blocks featured in the joint hypothesis in order to determine the sources of the rejection. We detail the findings of previously published research and supplement it where necessary with new work of our own.

This is a preview of subscription content, log in via an institution.

Chapter
USD   29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD   129.00
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD   169.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD   169.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Learn about institutional subscriptions

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  • Adler, M. and B. Lehmann (1983) “Deviations from purchasing power parity in the long run,” Journal of Finance, Vol. 45, 157–173.

    Google Scholar 

  • Admati, A.R. and P. Pfleiderer (1988) “A theory of intraday patterns: volume and price variability,” Review of Financial Studies, Vol. 1, 3–40.

    Article  Google Scholar 

  • Amihud, Y. and H. Mandelson (1980) “Dealership market: market-making with inventory,” Journal of Financial Economics, Vol. 8, 31–53.

    Article  Google Scholar 

  • Argy, V. and M.G. Porter (1972) “The forward exchange market and the effects of domestic and external disturbances under alternative exchange rate systems,” International Monetary Fund Staff Papers, Vol. 19, 503–527.

    Article  Google Scholar 

  • Backus, D.K, A.W. Gregory and C.I. Telmer (1993) “Accounting for forward rates in markets for foreign-currency,” Journal of Finance, Vol. 48, 1887–1908.

    Article  Google Scholar 

  • Baillie, R.T. and T. Bollerslev (1994) “The long memory of the forward premium,” Journal of International Money and Finance, Vol. 13, 565–571.

    Article  Google Scholar 

  • Bekaert, G., R.J. Hodrick and D. Marshall (1994) “On the implications of first-order risk aversion for asset market premiums,” National Bureau of Economic Research working paper, number 4624.

    Google Scholar 

  • Benassy-Quere, A., S. Larribeau and R. MacDonald (1998) “Do individuals use different models to forecast exchange rates? Evidence from panel data,” mimeo, University of Strathclyde.

    Google Scholar 

  • Bilson, J.F.O. (1981) “The ‘speculative efficiency’ hypothesis,” Journal of Business, Vol. 54, 435–451.

    Article  Google Scholar 

  • Bilson, J.F.O. (1985) “Macroeconomic stability and flexible exchange rates,” American Economic Review, Vol. 75, 62–67.

    Google Scholar 

  • Bollerslev, T. and I. Domowitz (1993) “Trading patterns and prices in the interbank foreign exchange market,” Journal of Finance, Vol. 48, 1421–1443.

    Article  Google Scholar 

  • Bollerslev, T. and M. Melvin (1994) “Bid-ask spreads and volatility in the foreign exchange market,” Journal of International Economics, Vol. 36, 355–372.

    Article  Google Scholar 

  • Branston, W.H. (1969) “The minimum covered interest differential needed for international arbitrage opportunities,” Journal of Political Economy, Vol. 77, 1028–1035.

    Article  Google Scholar 

  • Breuer, J.B. and M.E. Wohar (1996) “The road less traveled–institutional aspects of data and their influence on empirical estimates with an application to tests of forward rate unbiasedness,” Economic Journal, Vol. 106, 26–38.

    Article  Google Scholar 

  • Brunnermeier, M.K. (1997) “Price manipulation prior to public announcements,” mimeo London School of Economics.

    Google Scholar 

  • Campbell, J.Y. and R. Clarida (1987) “The term structure of euromarket interest rates: an empirical investigation,” Journal of Monetary Economics, Vol. 19, 25–44.

    Article  Google Scholar 

  • Cavaglia, S., W.F.C. Verschoor and C.C.P. Wolff (1993) “Further evidence on exchange rate expectations,” Journal or International Money and Finance, Vol. 12, 78–98.

    Article  Google Scholar 

  • Cavaglia, S., W.F.C. Verschoor and C.C.P. Wolff (1994) “On the biasedness of forward foreign-exchange rates — irrationality or risk premia?” Journal of Business, Vol. 67, 321–343.

    Article  Google Scholar 

  • Cheung, Y-W, M.D. Chinn, and I.W. Marsh (1998) “How do UK foreign exchange dealers think their market operates?,” mimeo, City University Business School..

    Google Scholar 

  • Cheung, Y W. and C.Y-P. Wong (1997) “Foreign exchange markets in Hong Kong, Tokyo and Singapore,” mimeo, University of California, Santa Cruz.

    Google Scholar 

  • Chinn, M.D. and J.A. Frankel (1994) “Patterns in exchange rate forecasts for 25 countries,”, Journal of Money, Credit and Banking, Vol. 26, 759–770.

    Article  Google Scholar 

  • Chionis, D. and R. MacDonald (1996) “Modelling disaggregate risk premia,” mimeo, University of Strathclyde.

    Google Scholar 

  • Chionis, D. and R. MacDonald (1997) “Some tests of market microstructure hypotheses in the foreign exchange market,” Journal of Multinational Financial Management, Vol. 7, 203–229.

    Article  Google Scholar 

  • Chionis, D. and R. MacDonald (1998) “Aggregate and disaggregate measures of the foreign exchange risk premium,” mimeo, University of Strathclyde.

    Google Scholar 

  • Cox, J.C., J.E. Ingersoll and S.A. Ross (1981) “The relationship between forward and futures prices,” Journal of Financial Economics, Vol. 9, 321–346.

    Article  Google Scholar 

  • Crowder, W.J. (1994) “Foreign exchange market efficiency and common stochastic trends,” Journal of International Money and Finance, Vol. 13, 551–564.

    Article  Google Scholar 

  • Cumby, R. and M. Obstfeld (1984) “International interest-rate linkages under flexible exchange rates: a review of recent evidence,” in Exchange rate theory and practice, J.F.O. Bilson and R.C. Marston (eds.), Chicago University Press: Chicago.

    Google Scholar 

  • Danker, D.J., R.H. Haas, D.W. Henderson, S.A. Symansky and R.W. Tyron (1985) “Small empirical models of exchange market intervention: applications to Germany, Japan, and Canada,” Federal Reserve Board StaffPaper, Number 135.

    Google Scholar 

  • Dominguez, K.A. and J.A. Frankel (1993) Does foreign exchange intervention work?, Institute for International Economics: Washington, D.C.

    Google Scholar 

  • Domowitz, I. and C.S. Hakkio (1985) “Conditional variance and the risk premium in the foreign exchange market,” Journal of International Economics, Vol. 19, 47–66.

    Article  Google Scholar 

  • Dombusch, R. (1976) “Expectations and exchange rate dynamics, Journal ofPolitical Economy, Vol. 84, 1161–1176.

    Article  Google Scholar 

  • Edison, H.J. (1993) “The effectiveness of central-bank intervention: a survey of the literature after 1982,” Special Papers in International Economics, No. 18, Princeton University.

    Google Scholar 

  • Edwards, S. (1983) “Exchange rates and ‘news’: a multi-currency approach,” Journal of International Money and Finance, Vol. 3, 211–224.

    Google Scholar 

  • Engel, C.M. (1994) “Can the Markov switching model forecast exchange rates?” Journal of International Economics, Vol. 36, 151–165.

    Article  Google Scholar 

  • Engel, C.M. (1996) “The forward discount anomaly and the risk premium: a survey of recent evidence,” Journal of Empirical Finance, Vol. 3, 123–191.

    Article  Google Scholar 

  • Engel, C.M. and A.P. Rodriguez (1993) “Tests of mean-variance efficiency in international equity markets,” Oxford Economic Papers, Vol. 45, 403–421.

    Google Scholar 

  • Engle, R. (1982) “Autoregressive conditional heteroscedasticity with estimates of the variance of the United Kingdom rate of inflation,” Econometrica, Vol. 55, 251–276.

    Article  Google Scholar 

  • Epstein, L. and S. Zin (1990) “‘First order’ risk aversion and the equity premium puzzle,” Journal of Monetary Economics, Vol. 26, 387–407.

    Article  Google Scholar 

  • Evans, M.D.D. and K.K. Lewis (1993) “Trends in excess returns in currency and bond markets,” European Economic Review, Vol. 37, 1005–1019.

    Article  Google Scholar 

  • Fama, E.F. (1970) “Efficient capital markets; a review of theory and empirical work,” Journal of Finance, Vol. 25, 383–417.

    Article  Google Scholar 

  • Fama, E.F. (1984) “Forward and spot exchange rates,” Journal of Monetary Economics, Vol. 14, 319–3 26.

    Google Scholar 

  • Fama, E.A. and A. Farber (1979) “Money, bonds and foreign exchange,” American Economic Review, Vol. 69, 269–282.

    Google Scholar 

  • Frankel, J.A. (1982) “In search of the exchange risk premium: a six-currency test assuming mean-variance optimization,” Journal of International Money and Finance, Vol. 1, 255–274.

    Article  Google Scholar 

  • Frankel, J.A. (1986) “The implications of mean-variance optimization for 4 questions in international macroeconomics,” Journal of International Money and Finance, Vol. 5, S53 - S75.

    Article  Google Scholar 

  • Frankel, J.A. and M.D. Chinn (1991) “Exchange rate expectations and the risk premium: tests for a cross-section of 17 currencies,” National Bureau of Economic Research working paper number 3806.

    Google Scholar 

  • Frankel, J.A. and C.M. Engel (1984) “Do asset-demand functions optimize over the mean and variance of real returns?–a 6-currency test,” Journal of International Economics, Vol. 17, 309–323.

    Article  Google Scholar 

  • Frankel, J.A. and K.A. Froot (1987) “Using survey data to test some standard propositions regarding foreign exchange rate expectations,” American Economic Review, Vol. 77, 133–153.

    Google Scholar 

  • Frankel, J.A. and K.A. Froot (1989) “Interpreting tests of forward discount bias using survey data on exchange rate expectations,” Quarterly Journal of Economics, Vol. 104, 89–96.

    Google Scholar 

  • Frankel, J.A. and K.A. Froot (1990a) “Chartists, fundamentalists and the demand for dollars,” in Private behavior and government policy in interdependent economies, A.S. Courakis and M.P. Taylor (eds.), Clarendon: Oxford.

    Google Scholar 

  • Frankel, J.A. and K.A. Froot (1990b) “Exchange rate forecasting techniques, survey data, and implications for the foreign exchange market,” National Bureau of Economic Research working paper number 3470.

    Google Scholar 

  • Fratianni, M. and L.M. Wakeman (1982) “The law of one price in the eurocurrency market,” Journal of International Money and Finance, Vol. 1, 307–323.

    Article  Google Scholar 

  • Frenkel, J.A. (1977) “The forward exchange rate, expectations, and the demand for money: the German hyperinflation,” American Economic Review, Vol. 67, 653–670.

    Google Scholar 

  • Frenkel, J.A. and R.M. Levich (1975) “Covered interest arbitrage: unexploited profits?” Journal of Political Economy, Vol. 83, 325–338.

    Article  Google Scholar 

  • Frenkel, J.A. and R.M. Levich (1977) “Transactions costs and interest arbitrage: tranquil versus turbulent periods,” Journal of Political Economy, Vol. 85, 1209–1224.

    Article  Google Scholar 

  • Froot, K.A. and J.A. Frankel (1989) “Forward discount bias: is it an exchange risk premium?” Quarterly Journal of Economics, Vol. 104, 139–161.

    Article  Google Scholar 

  • Froot, K.A. and R.H. Thaler (1990) “Foreign-exchange,” Journal of Economic Perspectives, Vol. 4, 179–192.

    Article  Google Scholar 

  • Giorgianni, L. (1997) “Foreign exchange risk premium. Does fiscal policy matter? Evidence from Italian data,” mimeo, International Monetary Fund.

    Google Scholar 

  • Giovannini, A. and P. Jorion (1987) “Interest rates and risk premia in the stock market and in the foreign exchange market,” Journal of International Money and Finance, Vol. 6, 234–246.

    Article  Google Scholar 

  • Glosten, L.R. and P.R. Milgrom (1985) “Bid, ask and transaction prices in a specialist market with heterogeneously informed traders, Journal ofFinancial Economics, Vol. 14, 71–100.

    Article  Google Scholar 

  • Goodhart, C.A.E. (1988) “The foreign exchange market: a random walk with dragging anchor,” Economica, Vol. 55, 437–460.

    Article  Google Scholar 

  • Goodhart, C.A.E. and T. Hesse (1993) “Central bank forex intervention assessed in continuous time,” Journal of International Money and Finance, Vol. 12, 368–389.

    Article  Google Scholar 

  • Goodhart, C.A.E., P.C. McMahon and Y.L. Ngama (1992) “Does the forward premium/discount help to predict the future change in the exchange rate?” Scotish Journal of Political Economy, Vol. 39, 129–140.

    Article  Google Scholar 

  • Grauer, F.R., R. Litzenberger and R. Stehle (1976) “Sharing rules and equilibrium in an international capital market under uncertainty,” Journal of Financial Economics, Vol. 3, 233–256.

    Article  Google Scholar 

  • Gregory, A.W. and T. McCurdy (1984) “Testing the unbiâsedness in the forward foreign exchange market,” Journal of International Money and Finance, Vol. 3, 357–368.

    Article  Google Scholar 

  • Gweke, J. and E. Feige (1979) “Some joint tests of markets for forward exchange,”Review of Economics and Statistics, Vol. 61, 334–341.

    Google Scholar 

  • Hakkio, C.S. and M. Rush (1989) “Market efficiency and cointegration: an application to the sterling and Deutschemark exchange rates,” Journal of International Money and Finance, Vol. 8, 75–88.

    Article  Google Scholar 

  • Hansen, L.P. and R.J. Hodrick (1983) “Risk averse speculation in the forward exchange market; an econometric analysis of linear models,” in Exchange rates and international macroecomonics, J.A. Frenkel (ed.) Chicago University Press: Chicago.

    Google Scholar 

  • Hansen, L.P. and S. Richard (1984) “A general approach for deducting testable restrictions implied by asset pricing models,” mimeo, University of Chicago.

    Google Scholar 

  • Hansen L.P. and K. Singleton (1982) “Generalized instrumental variables estimation of nonlinear rational expectations models,” Econometrica, Vol. 50, 1269–1286.

    Article  Google Scholar 

  • Ho, T.S.Y. and H.R. Stoll (1983) “The dynamics of dealer markets under competition,” Journal of Finance, Vol. 38, 1053–1075.

    Article  Google Scholar 

  • Hodrick, R. (1987) The empirical evidence on the efficiency of forward and futures markets, Harwood: Chur.

    Google Scholar 

  • Hodrick, R. (1989) “Risk, uncertainty and exchange rates,” Journal of Monetary Economics, Vol. 17, 433–459.

    Article  Google Scholar 

  • Hodrick, R. and S. Srivastava (1984) “An investigation of risk and return in forward foreign exchange,” Journal of International Money and Finance, Vol. 3, 1–29.

    Article  Google Scholar 

  • Hodrick, R. and S. Srivastava (1986) “The covariation of risk premiums and expected future spot rates,” Journal of International Money and Finance, Vol. 5, S5 - S22.

    Article  Google Scholar 

  • Isard, P. (1995) Exchange Rate Economics, Cambridge University Press: Cambridge.

    Google Scholar 

  • Ito, T. (1990) “Foreign exchange rate expectations: micro survey data,” American Economic Review, Vol. 80, 434–439.

    Google Scholar 

  • Ito, T., R.K. Lyons and M.T. Melvin (1998) “Is there private information in the FX market? The Tokyo experiment,” Journal of Finance, Vol. 53, 1111–1130.

    Article  Google Scholar 

  • Kaminsky, G. and R. Peruga (1990) “Can a time-varying risk premium explain excess returns in the forward market for foreign-exchange?”, Journal of International Economics, Vol. 28, 47–70.

    Article  Google Scholar 

  • Korajczyk, R.A. (1985) “The pricing of forward contracts for foreign exchange,” Journal of Political Economy, Vol. 93, 346–368.

    Article  Google Scholar 

  • Kouri, P.J.K. (1977) “International investment and interest rate linkages under flexible exchange rates,” in The political economy of monetary reform, R. Aliber (ed.), Macmillan: London.

    Google Scholar 

  • Kyle, A.S. (1985) “Continuous auctions and insider trading,” Econometrica, Vol. 53, 1315–1335.

    Article  Google Scholar 

  • Levich, R.M. (1985) “Empirical studies of exchange rates: Price behavior, rate determination and market efficiency,” in Handbook of international economics, Vol. 2, R.W. Jones and P.B. Kenen (eds.), North-Holland: Amsterdam.

    Google Scholar 

  • Levine, R. (1987) “The pricing of forward exchange rates,” International Finance Discussion Paper, number 312.

    Google Scholar 

  • Levin, A. and C-F. Lin (1992) “Unit root tests in panel data: asymptotic and finite sample properties,” mimeo, University of California, San Diego.

    Google Scholar 

  • Lewis, K.K. (1988) “Testing the portfolio balance model — a multilateral approach,” Journal of International Economics, Vol. 29, 104–127.

    Google Scholar 

  • Lewis, K.K. (1990) “The behavior of eurocurrency returns across different holding periods and monetary regimes,” Journal of Finance, Vol. 45, 1211–1236.

    Article  Google Scholar 

  • Lewis, K.K. (1991) “Should the holding period matter for the intertemporal consumption-based CAPM?” Journal of Monetary Economics, Vol. 28, 365–389.

    Article  Google Scholar 

  • Liu, P.C. and G.S. Maddala (1992) “Rationality of survey data and tests for market efficiency in the foreign exchange markets, Journal of International Money and Finance, Vol. 11, 366–381.

    Article  Google Scholar 

  • Longworth, D. (1981) “Testing the efficiency of the Canadian-US exchange market under the assumption of no risk premium,” Journal of Finance, Vol. 36, 43–49.

    Article  Google Scholar 

  • Lucas, R. (1982) “Interest rates and currency prices in a two-country world,” Journal of Monetary Economics, Vol. 10, 335–360.

    Article  Google Scholar 

  • Lyons, R.K. (1991 a) “Information intermediation in the microstructure of the foreign exchange market,” NBER Working Paper,number 3889.

    Google Scholar 

  • Lyons, R.K. (199 1 b) “Private beliefs and informational externalities in the foreign exchange market,” mimeo,University of California, Berkeley.

    Google Scholar 

  • Lyons, R.K. (1995) “Tests of microstructural hypotheses in the foreign-exchange market,” Journal of Financial Economics, Vol. 39, 321–351.

    Article  Google Scholar 

  • Lyons, R.K. (1996) “Optimal transparency in a dealer market with an application to foreign exchange,” Journal of Financial Intermediation, Vol. 5, 225–254.

    Article  Google Scholar 

  • Lyons, R.K. (1997) “A simultaneous trade model of the foreign exchange hot potato,” Journal of Financial Economics, Vol. 42, 275–298.

    Google Scholar 

  • MacDonald, R. (1990) “Are foreign exchange market forecasters rational? Some survey based tests,” Manchester School of Economic and Social Studies, Vol. 58, 229–241.

    Article  Google Scholar 

  • MacDonald, R. (1995) “Long-run exchange rate modeling,” International Monetary Fund Staff Papers, Vol. 42, 437–489.

    Article  Google Scholar 

  • MacDonald, R. (1997) “Is the foreign exchange market risky? Some new survey-based results,” mimeo, University of Strathclyde.

    Google Scholar 

  • MacDonald, R. and I.W. Marsh (1996) “Currency forecasters are heterogeneous: confirmation and consequences,” Journal of International Money and Finance, Vol. 15, 665–685.

    Article  Google Scholar 

  • MacDonald, R. and I.W. Marsh (1997) “A forward premium puzzle and the power of the panel,” mimeo, University of Strathclyde.

    Google Scholar 

  • MacDonald, R. and M.P. Taylor (1989) “Economic analysis of the exchange rate: an expository survey,” in Exchange rates and open economy macroeconomics, R. MacDonald and M.P. Taylor (eds.), Blackwell: Oxford.

    Google Scholar 

  • MacDonald, R. and M.P. Taylor (1991) “Testing efficiency in the interwar foreign exchange market: a multiple time series approach,” Weltwirtschaftliches Archiv, Vol. 127, 500–523.

    Article  Google Scholar 

  • MacDonald, R. and T.C. Torrance (1988) “On risk, rationality and excessive speculation in the Deutschmark-US dollar exchange market,” Oxford Bulletin of Economics and Statistics, Vol. 50, 544–561.

    Article  Google Scholar 

  • Madhavan, A. and S. Smidt (1991) “An analysis of changes in specialist inventories and quotations,” Journal of Finance, Vol. 48, 1595–1628.

    Article  Google Scholar 

  • Mark, N. (1985) “On time-varying risk premia in the foreign exchange market: an econometric analysis,” Journal of Monetary Economics, Vol. 16, 3–58.

    Article  Google Scholar 

  • Mark, N., Y. Wu and W. Hai (1993) “Understanding spot and forward rate regressions,” mimeo, Ohio State University.

    Google Scholar 

  • Marston, R.C. (1976) “Interest arbitrage in the eurocurrency markets,” European Economic Review, Vol. 7, 1–13.

    Article  Google Scholar 

  • McCallum, B.T. (1994) “A reconsideration of the uncovered interest parity relationship,” Journal of Monetary Economics, Vol. 33, 105–132.

    Article  Google Scholar 

  • Meese, R.A. and K. Singleton (1982) “A note on unit roots and the empirical modeling of exchange rates,” Journal of Finance, Vol. 37, 1029–1035.

    Article  Google Scholar 

  • Mehra, R. and E. Prescott (1985) “The equity premium: a puzzle,” Journal of Monetary Economics, Vol. 15, 145–162.

    Article  Google Scholar 

  • Meredith, G. and M.D. Chinn (1998) “Long-horizon uncovered interest rate parity,” NBER Working Paper number. 6797.

    Google Scholar 

  • Modjtahedi, B. (1991) “Multiple maturities and time-varying risk premia in forward exchange markets — an econometric analysis,” Journal of International Economics, Vol. 30, 69–86.

    Article  Google Scholar 

  • Nerlove, M. F.X. Diebold, H. van Beeck and Y. Cheung (1988) “A multivariate ARCH model of foreign exchange determination,” mimeo, University of California.

    Google Scholar 

  • O’Hara, M. and G.S. Oldfield (1986) “The microeconomics of market making,” Journal of Financial and Quantitative Analysis, Vol. 21, 361–376.

    Article  Google Scholar 

  • Peiers, B. (1997) “Informed traders, intervention, and price leadership: a deeper view of the microstructure of the foreign exchange market,” Journal of Finance, Vol. 52, 1587–1614.

    Article  Google Scholar 

  • Prat, G. (1994) “La formation des anticipations boursières,” Economie et Prévision, Vol. 112, 101–125.

    Article  Google Scholar 

  • Richard, S. and S. Sundaresan (1981) “A continuous time equilibrium model of forward prices and futures prices in a multigood economy, Journal of Financial Economics, Vol. 9, 347–372.

    Article  Google Scholar 

  • Rogoff, K. (1984) “On the effects of sterilized intervention: an analysis of weekly data,” Journal of Monetary Economics, Vol. 14, 123–150.

    Article  Google Scholar 

  • Roll, R. (1979) “Violations of purchasing power parity and their implications for efficient commodity markets,” in International Finance and Trade I, M. Sarnat and G. Szego (eds.), Ballinger: Cambridge.

    Google Scholar 

  • Stockman, A. (1978) “Risk, information and forward exchange rates,” in The economics of exchange rates, H.G. Johnson and J.A. Frankel (eds.), Addison-Wesley: Reading.

    Google Scholar 

  • Tagaki, S. (1991) “Exchange rate expectations: a survey of survey studies,” International Monetary Fund Staff Papers, Vol. 38, 156–183.

    Article  Google Scholar 

  • Taylor, M.P. (1987) “Covered interest parity: a high-frequency, high-quality data study,” Economica, Vol. 54, 429–438.

    Article  Google Scholar 

  • Taylor, M.P. (1989) “Covered interest arbitrage and market turbulence,” Economic Journal, Vol. 99, 376–391.

    Article  Google Scholar 

  • Taylor, M.P. and H. Allen (1992) “The use of technical analysis in the foreign exchange market,Journal of International Money and Finance, Vol. 11, 304–314.

    Google Scholar 

  • Thomas, S.H. and M.R. Wickens (1993) “An international CAPM for bonds and equities,” Journal of International Money and Finance, Vol. 12, 390–412.

    Article  Google Scholar 

  • Varian, H.R. (1989) “Differences of opinion in financial markets,” in Financial risk: evidence and implications, C.C. Stone (ed.), Kluwer: Boston.

    Google Scholar 

  • Wolff. C.C.P. (1987) “Forward foreign exchange rate, expected spot rates, and premia: a signal-extraction approach,” Journal of Finance, Vol. 42, 395–406.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. University of Strathclyde, UK

    Ronald MacDonald

  2. City University Business School, UK

    Ian Marsh

Authors
  1. Ronald MacDonald
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Ian Marsh
    View author publications

    You can also search for this author in PubMed Google Scholar

Rights and permissions

Reprints and permissions

Copyright information

© 1999 Springer Science+Business Media Dordrecht

About this chapter

Cite this chapter

MacDonald, R., Marsh, I. (1999). Spot and Forward Market Relationships. In: Exchange Rate Modelling. Advanced Studies in Theoretical and Applied Econometrics, vol 37. Springer, Boston, MA. https://doi.org/10.1007/978-1-4757-2997-9_2

Download citation

  • DOI: https://doi.org/10.1007/978-1-4757-2997-9_2

  • Publisher Name: Springer, Boston, MA

  • Print ISBN: 978-1-4419-5113-7

  • Online ISBN: 978-1-4757-2997-9

  • eBook Packages: Springer Book Archive

Publish with us

Policies and ethics

Search

Navigation