This paper uses long-horizon autocorrelations and variance ratio statistics to test for long-term mean reversion in real exchange rates. Unlike most previous tests of this hypothesis, the tests do reject a random walk for monthly data in the post-Bretton Woods era; however, the statistics...

Under certain conditions, efficient markets imply random walk behavior in real exchange rates. Much of international finance theory, however, is based on the idea of purchasing power parity, which implies mean reversion in real exchange rates. This paper uses variance ratio statistics to test...

Previous attempts to reject the hypothesis that real exchange rates follow a random walk have produced mixed results. This paper incorporates mean reversion and conditional heteroscedasticity into tests based on a theoretical model of deviations from the law of one price by Dumas (1988). The...

An evaluation of the performance of foreign exchange hedges shows that, in a mean-variance framework, fully hedging exchange risk does not improve the performance of a portfolio of international equities; however, dynamic strategies which incorporate market information on risk premiums in the...