For more than two decades now, researchers have been attempting to characterize the behavior of certain speculative market prices. Typically, these studies have been concerned with whether price changes are independent over time (consistent with market prices fully reflecting information) or may be characterized as following a certain specified frequency distribution. Knowledge of both is important to the efficient construction of portfolio positions. Knowing the latter is a prerequisite to specifying exposure to portfolio risk. Knowing the former is necessary to determining return opportunities. Of course, knowledge of both is important to our understanding of how speculative markets operate.;Several hypotheses about the distributional properties of foreign exchange rate changes (specifically, 1nX(,t) = 1n(P(,t)/P(,t-1)) where P(,t) is the exchange rate in period t) are investigated for each currency. Specific evidence is offered on whether the distributions approximate normal, nonnormal stable Paretian, or subordinated stochastic processes. The distributional properties of daily, weekly (e.g., Monday to Monday) and day of the week (e.g., Monday to Tuesday) exchange rate changes are investigated. Comparisons are made of the distributions across days of the week and across currencies.;With the exception of the German mark and the Swedish krona where the results are somewhat inclusive, the normal and stable Paretian distributions do not provide a good description of daily exchange rate changes. Except for the British pound, goodness of fit tests tend to support the hypothesis that weekly exchange rate changes are adequately described by nonnormal stable Paretian distributions; however, this hypothesis is not supported by tests of stability. The Swedish krona is the only currency where the stable Paretian hypothesis is supported by tests of stability. These results are contrary to findings reported in the literature.;The hypothesis that the five weekly exchange rate series (i.e., Monday to Monday, Tuesday to Tuesday, etc.) come from the same distribution is not rejected. When the distributions for days of the week are compared, the hypothesis that the underlying distributions are equal is rejected. This last result supports a theory that different returns for different days of the week may be a result of different information flows. This evidence for the existence of trading day effects raises questions about efficiency in the foreign exchange market and the assumption of equally spaced trading periods in previous studies.;The purpose of this dissertation is to investigate the distributional characteristics of exchange rate changes for four major and four minor foreign currencies. Twelve currency markets are analyzed. These include spot and three month forward markets for the exchange of dollars for four major trading currencies (the British pound, the German mark, the Japanese yen, and the Swiss franc) and spot markets for four less actively traded currencies (the Australian dollar, the Malaysian ringgit, the Spanish peseta, and the Swedish krona). The data base consists of daily observations from January 2, 1975 through June 29, 1979.;The question of the most appropriate model for describing exchange rate changes remains unresolved; however, results from some of the tests in this dissertation suggest that the investigation of mixtures of distributions is a fruitful area for future research.
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