scholarly journals Weak-Form Efficiency of Foreign Exchange Market in the Organisation for Economic Cooperation and Development Countries: Unit Root Test

2011 ◽  
Vol 6 (6) ◽  
Author(s):  
Juliana Ibrahim ◽  
Yasmiza Long ◽  
Hartini Ab. Ghani ◽  
Safrul Izani Mohd Salleh
Keyword(s):  
Foreign Exchange ◽  
Unit Root ◽  
Foreign Exchange Market ◽  
Unit Root Test ◽  
Weak Form ◽  
Economic Cooperation ◽  
Exchange Market ◽  
Weak Form Efficiency

scholarly journals Foreign Exchange Market Efficiency In Botswana

2017 ◽  
Vol 10 (1) ◽  
pp. 103-125 ◽  
Author(s):  
Gofaone Matebejana ◽  
Gaotlhobogwe Motlaleng ◽  
James Juana
Keyword(s):  
Random Walk ◽  
Exchange Rates ◽  
Foreign Exchange ◽  
Unit Root ◽  
Foreign Exchange Market ◽  
Weak Form ◽  
Strong Form ◽  
Unit Root Tests ◽  
Exchange Market ◽  
Weak Form Efficiency

Abstract The random walk behaviour of exchange rates in Botswana’s foreign exchange market is explored by employing unit root tests. The unit root tests employed include the ADF, PP and the KPSS. This paper uses monthly data for the period 2000:01 to 2015:12. The conclusive evidence based on the unit roots tests indicates that the behaviour of the Pula against the South African Rand, Japanese Yen and the American Dollar exchange rates is consistent with the random walk process and the weak form efficiency market hypothesis. However, the Pula against the British Pound is inconsistent with the weak form efficiency market hypothesis. These results compliment those from Namibia (Mabakeng and Sheefeni, 2014). Furthermore, there is no evidence of the semi-strong form level of efficiency as revealed by the cointegration results obtained. These results corroborates with those found by Wickremasinghe (2008) and Çiçek (2014) in which weak form was found to exist whilst the semi-strong form was found not to exist. This paper has filled an important gap as it is the first study to investigate the efficiency of the foreign exchange market in Botswana.

scholarly journals A Comparative Analysis of Weak and Semi-Strong Form Efficiency of Nigerian and South African Foreign Exchange Market

2021 ◽  
Vol 04 (07) ◽  
Author(s):  
Adetan, Taiwo Temitayo ◽  
Keyword(s):  
Exchange Rates ◽  
South African ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Weak Form ◽  
Strong Form ◽  
Exchange Market ◽  
Market Participants ◽  
Available Information ◽  
Weak Form Efficiency

Foreign exchange market is said to be efficient if all available information are reflected in its exchange rates. An efficient foreign exchange translates to absence of profitable and exploitable trends which means that it is impossible for market participants or private agents to outperform the market. This study investigated the weak and semi-strong form efficiency of Nigerian and South African foreign exchange market to determine the significance of past exchange rates in predicting the present rate which is the test of weak form efficiency and it examined the co-integration relationships between selected pairs of exchange rate to determine the semi-strong efficiency. The secondary data used in this study were sourced mainly from the Central Bank of Nigeria Statistical Bulletin, the South African Reserve Bank Bulletin and the oanda exchange rate websites. The data used were the inter-bank spot exchange rates of Naira and Rand to Swiss Franc, Euro, Pounds, Dollar and Yen for the period of January 2010 to December 2017. The Augmented Dickey Fuller (ADF) test and the Phillip Peron (PP) test were employed to determine the weak form efficiency while the Variance Decomposition, Granger Causality and Co-integration tests were used to determine the semi-strong form efficiency of both countries. The results of the study revealed that the Nigerian foreign exchange market is efficient in the weak and semi-strong form at 5% level of significance while the weak form efficiency of South African foreign exchange market revealed mixed results. The market is efficient in the weak form except for the case of Rand to Dollar and Rand to Yen which showed inefficiency. The market is equally efficient in semi-strong form. The study concluded that market participants cannot make exploitable profits by trading in both markets because all past and publicly available information are already incorporated in the prices of exchange rates. It was therefore recommended that the inter-bank market in both countries should be well monitored and managed by the regulatory authorities so as to promote the effective and efficient smooth functioning of the foreign exchange market as well as achieving a stable and realistic exchange rates.

scholarly journals A TEST OF THE EFFICIENCY OF THE FOREIGN EXCHANGE MARKET IN INDONESIA

2019 ◽  
pp. 439-464 ◽  
Author(s):  
Bernard Njindan Iyke
Keyword(s):  
Exchange Rates ◽  
Foreign Exchange ◽  
Unit Root ◽  
Half Life ◽  
Foreign Exchange Market ◽  
Structural Breaks ◽  
Unit Root Test ◽  
Exchange Market

We test whether the Indonesian foreign exchange market is efficient. Since empiricalevidence has been inconclusive, we employ a new generalized autoregressiveconditional heteroskedasticity–based unit root test to examine the Efficient MarketHypothesis (EMH). The advantages of this model are that it accommodates twoendogenous structural breaks and heteroskedasticity. Tests that account for structuralbreaks reject the EMH in only 29% of cases. When we accommodate both structuralbreaks and heteroskedasticity, we find the EMH is rejected in 50% of cases. Finally, weexamine the half-life of exchange rates and find that 71% of rates revert to equilibriumwithin a month.

scholarly journals Weak Form Efficiency of Pakistan Stock Market using Non-Parametric Approaches

2011 ◽  
Vol 2 (6) ◽  
pp. 249-257
Author(s):  
Muhammad Irfan ◽  
Maria Irfan .
Keyword(s):  
Stock Market ◽  
Unit Root ◽  
Stock Exchange ◽  
Unit Root Test ◽  
Weak Form ◽  
Lilliefors Test ◽  
Anderson Darling ◽  
Non Parametric ◽  
Weak Form Efficiency

This paper studies the performance of Karachi Stock Exchange (KSE) of Pakistan via nonparametric approaches. The study includes the weekly open and closing prices of KSE- 100 indexes for the period of 1st January 1999 to 31st August 2009. Several non-parametric approaches including KolmogorovSmirnov test (Lilliefors test), Ryan-Joiner test (Shapiro-Wilk), Anderson-Darling test, Phillips Perron (PP) unit root test and Runs test are used to test the conviction of the KSE stock market. All non-parametric tests graphically and numerically inform us that both return series do not follow the assumption of normality and randomness, which means rejecting the hypothesis of weak form of efficiency. Generally, results from the observed analysis strongly recommend that the Karachi Stock Market of Pakistan is not efficient.

Testing Random Walk Hypothesis in Turkish Foreign Exchange Market

2015 ◽  
pp. 51-63
Author(s):  
Levent Çıtak ◽  
Veli Akel ◽  
Murat Çetin
Keyword(s):  
Exchange Rate ◽  
Random Walk ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Weak Form ◽  
Efficient Market Hypothesis ◽  
Ratio Test ◽  
Exchange Market ◽  
Developed Economies ◽  
Random Walk Hypothesis

This chapter revisits the empirical validity of the weak-form efficient market hypothesis for Turkish foreign exchange markets. The random-walk hypothesis in foreign-exchange rates market is one of the most researched areas, particularly in developed economies. This chapter applies ADF and PP unit root test, Lo and MacKinlay's (1988) conventional variance ratio test and Ljung-Box Q tests to examine the validity of the random-walk hypothesis in the Turkish foreign-exchange market. The chapter utilizes weekly nominal TRY/USD exchange rate for data from January 2000 to December 2013. The results provide evidence rejecting the random walk hypothesis for weekly nominal exchange rate series.

Globalization and Time-Varying Market Efficiency

2019 ◽  
pp. 480-499
Author(s):  
Melik Kamışlı ◽  
Serap Kamışlı ◽  
Fatih Temizel
Keyword(s):  
Real Estate ◽  
Market Efficiency ◽  
Portfolio Management ◽  
Unit Root ◽  
Unit Root Test ◽  
Weak Form ◽  
Global Scale ◽  
Time Varying ◽  
Policy Makers ◽  
Weak Form Efficiency

The main purpose of this study is to determine time-varying weak form efficiency of 18 Borsa İstanbul sub-sector indices. In line with this purpose weak form efficiency is tested with innovative technique alongside traditional methods. The study indicated that bank, real estate invest trusts, holding & investments, telecommunication, wood, paper & printing, insurance, tourism and transportation indices are not linear. The weak form efficiency of aforementioned indices is analyzed with a rolling KSS unit root test developed by Yılancı. It is concluded depending on the applied tests that weak form efficiency of all of the nonlinear sub-sector indices has a time-varying structure. Results also showed that global scale events affect weak form efficiency of the indices in different durations. Findings gained from the study can be used by investors in strategic portfolio management decisions and by policy makers as well.

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