The purpose of this paper iS twofold．First，we examine the“efficient—markets hypothesis”for foreign exchange markets for several different currencies．By the efficient。markets hypothesis．we mean the proposition that the expected rate of return to speculation in the forward foreign exchange market conditioned on available in formation iS zero．Several authors have noted theoretical problems with this proposition since it ignores some intertemporal allocation and risk considerations．These theoretical arguments indicate that One should not equate empirical rejection of this notion of efficiency.