Survey data on exchange rate expectations are used to divide the forward discount into expected depreciation and a risk premium. Our starting point is the common test oh whether the forward discount is an unbiased predictor of future changes in the spot rate. We use the surveys to decompose the...

Several recent developments have inspired us to consider a non-standard model of the dollar as a speculative bubble without the constraint of fully rational expectations: (1) the dollar continued to rise in 1984 after real interest rate differentials and other fundamentals began moving the wrong...

Survey data provide a measure of exchange rate expectations that is superior to the commonly-used forward exchange rate in the respect that it does notinclude a risk premium. We use survey data and the technique of bootstrapping to test a number of propositions of interest. We are able to reject...

The general price level does not provide a sensitive indicator of whether monetary policy is tight or loose, because mostprices are sticky. Interest rates are free to move, but they are an ambiguous indicator of monetary policy: one does not know whether changes in the interest rate are due to...

The Capital Asset Pricing Model (CAPH) says that the responsiveness of asset-demands to expected returns depends (inversely) on the variance-covariance matrix of returns, rather than being an arbitrary set of parameters.Previous tests of CAPM have usually computed covariances of returns around...

Volatility tests are an alternative to regression tests for evaluating the joint null hypothesis of market efficiency and risk neutrality. Acomparison of the power of the two kinds of tests depends on what the alternative hypothesis is taken to be. By considering tests based on conditional...

International asset demands are functions of expected returns.Optimal portfolio theory tells us that the coefficients in this relationship depend on the variance-covariance matrix of real returns.But previous estimates of the optimal portfolio (1) assume expected returns constant and (2) are not...

On a Friday that the Fed announces a money supply greater than had been anticipated, interest rates move up in response. Why? One explanation is that the market perceives the fluctuation in the moneystock as an unintended deviation from the Fed's target growth rate that will be reversed in...

When the US Bureau of Labor Statistics releases new numbers, in theory it should make no difference whether the press release emphasizes the most recent 1-month number, which is what it always does, or the 12-month number, as many other countries' statistical agencies do. This paper offers the...

We explore a framework that could be used to assign quantitative allocations of emissions of greenhouse gases (GHGs), across countries, one budget period at a time. Under the two-part plan: (i) China, India, and other developing countries accept targets at Business as Usual (BAU) in the coming...