Tests of Excess Forecast Volatility in the Foreign Exchange and Stock Markets / Kenneth A. Froot.

Format:

Book

Author/Creator:

Froot, Kenneth A.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w2362.

NBER working paper series no. w2362

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1987.

Summary:

Simple regression tests that have power against the alternatives that. asset prices and expected future asset returns are excessively volatile are developed and performed for the foreign exchange and stock markets. These tests have a number of advantages over alternative, variance hounds techniques. We find evidence that. both exchange rates and stock prices are excessively volatile and that expected returns on foreign exchange and stocks move too much. We also investigate whether these findings ran he attributed to time-varying risk premia, but in our tests the data provide little support for such an alternative hypothesis.

Notes:

Print version record

August 1987.