The separate variance‐ratio tests under homoscedasticity and heteroscedasticity both provide evidence rejecting the random walk hypothesis, using five pairs of weekly nominal exchange rate series over the period from August 7, 1974 to March 29, 1989. The rejections cast doubt on the random walk hypothesis in exchange rates, which has received support in the existing literature. Furthermore, since the rejections are robust to heteroscedasticity, they suggest autocorelations of weekly increments in the nominal exchange rate series, which may be consistent with the exchange rate overshooting or undershooting phenomenon.

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This paper tests the uncorrelatedness of increments of daily foreign currency futures prices and derives implications for risk premia based on a heteroscedasticity‐robust variance ratio test. There is evidence suggesting the existence of a time‐varying risk premia. Moreover, the results suggest that currency futures price is not an unbiased predictor of currency spot price on corresponding maturity date of currency futures contract. The paper also applies a heteroscedasticity‐adjusted Box‐Pierce Q test to the same data set for comparison.

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