We build on the predictability bounds of Huang et al. (2017) and Potì (2018) to develop an index of informational market inefficiency. This index takes values given by the levels of relative risk aversion (RRA) of the marginal investor such that, net of sampling error at a given confidence...

This paper studies predictability of currency returns over the period 1971-2006. To assess the economic significance of currency predictability, we construct an upper bound on the explanatory power of predictive regressions. The upper bound is motivated by quot;no good-dealquot; restrictions...

Theoretical and empirical research completed over the last decade has dramatically increased our understanding of exchange rate behavior. The major insight to come from this decade of research is that foreign exchange is a financial asset. In an asset pricing framework, current exchange rates...