This paper develops new inference methods for testing the expectations hypothesis in a general econometric framework. In particular, we consider nonparametric tests of the predictability of excess returns in the presence of MA disturbances. We discuss several alternatives of aggregation and...

We propose a simple identification scheme for the causes of the violations of uncovered interest parity. Our method uses the serial dependence patterns of excess returns as a criterion for judging performance of economic models. We show that a mean reverting component in excess returns,...

Using USD bilateral exchange rates in 1975-2009, we find that the strong predictability of foreign excess returns documented in the literature is mainly driven by a particular sample period. We first show that both the statistically significant positive serial dependence of excess returns in the...