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ABSTRACTThis paper examines the statistical distribution of exchange rates for eight major currencies for the post‐1973 floating rate period. The results show that spot rates, forward rates, and ex‐post risk premia all exhibit significant, persistent, but varying deviations from normality, and that the risk premia in forward rates reflect investor preferences for skewness and investor aversion towards standard deviation and kurtosis. These results imply that foreign currency forecasting and hedging practices, mean‐variance portfolio analysis, pricing of foreign currency options, and other research involving exchange rates should account for these significant deviations from normality.

Industrial firms in the other countries of Southeast Asia and in some developed countries.

Unlike most prior literature in finance and economics, this article focuses on events in the political economy and examines the integration of European equity markets over the 1988 through 2002 period using two innovative techniques that assess how the level of integration in equity price indices changes over time. The results show that notwithstanding the rising interdependencies between the European and US equity markets during the mid- to late 1990s, the long-run integrative relationships governing the European markets strengthen only in the late 1980s. This evidence suggests that despite several years of political willingness by European leaders to integrate economies, the equity markets only responded to the Delors Report (1989) and the Strasbourg Declaration (1989) that the European Economic Community would move towards European Monetary Union, but they provided little positive long-run response to subsequent developments pertaining to European Monetary Union. Adapted from the source document.