The Empirical Evidence on the Efficiency of Forward and Futures Foreign Exchange Markets. Vol. 24, Fundamentals of Pure and Applied Economics

Written for graduate students, researchers and professionals in international finance and academia, this book provides a useful foundation for future research in developing quantitative measures of risk and expected return in international finance. After a discussion of a general rational expectations asset pricing model, Hodrick considers the development and implementation of econometric tests of various hypotheses that have been offered as candidate characterizations of efficiency in foreign exchange markets. He shows that models which ignore the role or risk are rejected by the data, and examines alternative models of risk premiums. In doing so, he provides a critical examination and review of the subject area.