NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Tests of Excess Forecast Volatility in the Foreign Exchange and Stock Markets

Kenneth A. Froot

NBER Working Paper No. 2362
Issued in August 1987
NBER Program(s):   ME   ITI   IFM

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.

download in pdf format
   (411 K)

email paper

This paper is available as PDF (411 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w2362

Users who downloaded this paper also downloaded these:
Frankel and Froot w3470 Exchange Rate Forecasting Techniques, Survey Data, and Implications for the Foreign Exchange Market
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us