Speculation and the Forward Foreign Exchange Rate: A Note

Time Series Behaviour, Predictability and Speculation In the Hong Kong Foreign Exchange Market

“…This analysis does not take account of the effect of transaction Finally, our tests rest on the assumption that the speculative position is held until maturity. In practice, the movement of the future forward rate for the same delivery date will also be important if the speculator squares his position before maturity (Callier 1980). In addition, since exchange rates fluctuate throughout each day, it is not clear that closing-to-closing rates provide the most suitable basis for examining forecasting performance and speculative returns; data shortages necessitated this assumption.…”