On Cointegration and Tests of Forward Market Unbiasedness
This paper provides univariate and multivariate tests of the unbiasedness hypothesis in forward market efficiency studies using canonical regression procedures for cointegrated systems. The advantage of conducting inference on levels rather than differenced data include greater asymptotic efficiency...
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| Main Authors: | , , |
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| Format: | text |
| Language: | English |
| Published: |
Institutional Knowledge at Singapore Management University
1992
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| Subjects: | |
| Online Access: | https://ink.library.smu.edu.sg/lkcsb_research/2252 https://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=4645892&site=ehost-live |
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| Institution: | Singapore Management University |
| Language: | English |
| Summary: | This paper provides univariate and multivariate tests of the unbiasedness hypothesis in forward market efficiency studies using canonical regression procedures for cointegrated systems. The advantage of conducting inference on levels rather than differenced data include greater asymptotic efficiency in estimation, and overcoming the contemporaneous correlation problem among regressors and a stationary risk premium. We demonstrate that the procedure can isolate the time series properties of the forward market risk premium. Canonical regression procedures can also be used to identify which forward rates predict future spot rates in semi-strong form efficiency tests. [ABSTRACT FROM AUTHOR] |
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