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 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]
Review of Economics and Statistics, The
Corbae, Dean; Lim, Kian Guan; and Ouliaris, Sam.
On Cointegration and Tests of Forward Market Unbiasedness. (1992). Review of Economics and Statistics, The. 74, (4), 728. Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/2252