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Publications
Publications
  • 1987
  • Working Paper

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

By: K. A. Froot
  • Format:Print
  • | Language:English
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Abstract

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 bounds 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 can be attributed to time-varying risk premia, but in our tests the data provide little support for such an alternative hypothesis.

Keywords

Risk Aversion; Risk; International Investing; International Finance; Risk and Uncertainty; Asset Pricing; Financial Markets; Investment; Behavioral Finance; Volatility

Citation

Froot, K. A. "Tests of Excess Forecast Volatility in the Foreign Exchange and Stock Markets." NBER Working Paper Series, No. 2362, August 1987.

About The Author

Kenneth A. Froot

→More Publications

More from the Author

    • July 2017
    • Journal of Financial Economics

    What Do Measures of Real-Time Corporate Sales Tell Us About Earnings Surprises and Post-announcement Returns?

    By: Kenneth A. Froot, Namho Kang, Gideon Ozik and Ronnie Sadka
    • May 2012 (Revised February 2013)
    • Faculty Research

    Innovating into Active ETFs: Factor Funds Capital Management LLC (TN)

    By: Lauren Cohen, Kenneth Froot and Timothy Gray
    • Journal of Portfolio Management

    How Institutional Investors Frame Their Losses: Evidence on Dynamic Loss Aversion from Currency Portfolios

    By: Kenneth A. Froot, John Arabadjis, Sonya Cates and Stephen Lawrence
More from the Author
  • What Do Measures of Real-Time Corporate Sales Tell Us About Earnings Surprises and Post-announcement Returns? By: Kenneth A. Froot, Namho Kang, Gideon Ozik and Ronnie Sadka
  • Innovating into Active ETFs: Factor Funds Capital Management LLC (TN) By: Lauren Cohen, Kenneth Froot and Timothy Gray
  • How Institutional Investors Frame Their Losses: Evidence on Dynamic Loss Aversion from Currency Portfolios By: Kenneth A. Froot, John Arabadjis, Sonya Cates and Stephen Lawrence
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