Using non-linear methods to search for risk premia in currency futures

Journal Article

This paper uses currency futures prices to test the joint null hypotheses of rational expectations and absence of a time-varying risk premium in the foreign exchange market. We find no linear predictability in the logarithm of futures price changes, either using its own past or past interest differentials. Also we establish that there is no non-linear predictability in log price changes, conditioning on its own past, or past interest rate differentials. Thus, if a time-varying risk premium exists in currency futures market, it is not related to its own past or past interest rate differentials. © 1993.

Full Text

Duke Authors

Cited Authors

  • Hsieh, DA

Published Date

  • January 1, 1993

Published In

Volume / Issue

  • 35 / 1-2

Start / End Page

  • 113 - 132

International Standard Serial Number (ISSN)

  • 0022-1996

Digital Object Identifier (DOI)

  • 10.1016/0022-1996(93)90007-K

Citation Source

  • Scopus