Theoretical and empirical research completed over the last decade has dramatically increased our understanding of exchange rate behavior. The major insight to come from this decade of research is that foreign exchange is a financial asset. In an asset pricing framework, current exchange rates...

This paper studies predictability of currency returns over time and the extent to which it is captured by trading rules commonly used in currency markets. We consider the strategies that an investor endowed with rational expectations could have pursued to exploit out-of-sample currency...

This chapter provides an overview of empirical results concerning recent exchange rate behavior. Alternative valuation measures, time series, and distributional properties have been covered in the chapter, along with estimates of transaction costs in the foreign exchange market. The chapter...