ABSTRACT
One of the most extensively researched topics in international finance literature is the efficiency of the forward market for foreign exchange. Researchers such as Levich (1978), Frenkel (1980), and Tease (1988) reported evidence in support of forward market efficiency. However, a large body of empirical evidence has rejected the forward rate as an unbiased or efficient predictor of the corresponding future spot exchange rate (Frenkel, 1979; Hansen and Hodrick, 1980; Hakkio, 1981; Hsieh, 1984; Hodrick, 1987; MacDonald, 1988; Bailie, 1989; Madsen, 1990).
