International Journal of Economics and Management Volume: 1 Issue: 3 Pages: 15-22 15 | www.ijem.net Return Predictability of Exchange Rate in Iran Mohsen Mehrara Faculty of Economics, University of Tehran, Tehran, Iran mmehrara@ut.ac.ir Mostafa Boroujli MA in Economics, University of Tehran boroojli@ut.ac.ir Abstract The question of whether asset price changes are predictable has long been the subject of many studies. This article assesses the predictability of the weekly returns of the Iranian Rial against the exchange rates of the US dollar, the euro, and the British pound during the period 2000 to 2011. It will be shown that the returns are not predictable using publicly available information, and they are martingale difference sequences. Therefore, the exchange rate returns do not seem to be predictable, in weak or semi-strong forms. JEL Classification: F31; G17 Keywords: Exchange Rate; Forecasting; Martingale Difference Sequences; predictability 1. Introduction The question of whether asset price changes are predictable has long been the subject of many studies. There is an old joke among economists, about an economist walking the street with his mate. They saw a $100 bill on the ground, and as the mate reaches down to pick it up, the economist says, ‘Don’t bother, if it was a genuine $100 bill, someone would have already