Some Forecasters Believe That Foreign Exchange Markets for the Major

question 53

Essay

Some forecasters believe that foreign exchange markets for the major floating currencies are "efficient" and forward exchange rates are unbiased predictors of future spot exchange rates. Explain the rationale of this statement including the assumptions made, the meaning of "efficient" and "unbiased," and the empirical evidence.

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Definitions:

Unemployment

The condition of being jobless and actively seeking work, representing a measure of the health of an economy.

Conscientiousness

A personality trait characterized by thoroughness, caution, and the tendency to strive for achievement, self-discipline, and dutifulness.

Motivational Trait

Personal characteristics that influence an individual’s tendency to pursue goals with energy and persistence.

Emotional Stability

A personality trait characterized by the consistency of one's emotional state and the ability to remain calm and composed under stress.