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The random walk hypothesis of the exchange rate:Implications for a risk premium

Authors
Journal
Economics Letters
0165-1765
Publisher
Elsevier
Publication Date
Volume
45
Issue
2
Identifiers
DOI: 10.1016/0165-1765(94)90135-x

Abstract

Abstract We show that the exchange rate can follow a random walk without assuming risk neutrality. We are thus able to derive a random walk hypothesis for the exchange rate which is associated with a risk premium that may differ from zero.

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