Some Empirical Observations on the Forward Exchange Rate Anomaly

  title={Some Empirical Observations on the Forward Exchange Rate Anomaly},
  author={Derek Bond and Michael J. Harrison and Niall Hession and E. J. O'Brien},
This paper looks at issues surrounding the testing of fractional integration and nonlinearity in relation to the forward exchange rate anomaly of Fama (1984). Recent tests for fractional integration and nonlinearity are discussed and used to investigate the behaviour of three exchange rates and premiums. The findings provide some support for I(1) exchange rates but suggest fractionality for premiums, mixed evidence on cointegration, and a strong possibility of time-wise nonlinearity… CONTINUE READING

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