Exercise 2 :   Efficiency Test Using Variables in First Differences

st+1 - st = a + b (ft - st) + ut+1

Constante ft R2 D.W. F F
H0: b=1		 F
H0: a=0,b=1		 Q(12)
-0.0022* -3.1428* 0.00 1.86 0.03 2.17 2.17 8.99
(-0.72) (-0.18)            

*(**) Meaningful at the 1% (5%) level.
Monthly data for the period January 1979 to January 1994.
Currency: French Franc

The table presents the results of the second test of speculative efficiency for the 30 days forward exchange market. This test is based on the estimation of an equation linking the future depreciation rate st, to the forward premium ft.

  1. There is a constant risk premium
    yes          no
  2. The constant is null and the slope is equal to one
    yes          no
  3. The DW statistics indicates that there is no autocorrelation of order one
    yes          no
  4. The series is autocorrelated (order superior or equal to one)
    yes          no
  5. The forward market is efficient
    yes          no

 
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