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Efficiency Tests in Foreign Exchange Market

Author

Listed:
  • Hsien-Yi Lee

    (Department of Business Administration, Cheng Shiu University, Taiwan)

  • Khatanbaatar Sodoikhuu

    (Graduate Institute of Business and Management, Cheng Shiu University, Taiwan)

Abstract

The main purpose of the paper is applying filter rules to examine the efficiency of foreign exchange. This paper uses three strategies of filter rules (buy long, sell short, buy long and sell short strategies) to test the performance of the transaction for EUR, JPY, GBP. The findings show that people will obtain more return by taking buy long/sell short strategies of filter rules without considering transaction cost. However, the transaction of these three foreign exchange rate (EUR, JPY, GBP) will be more efficient by considering transaction cost. The results imply the foreign exchange market is efficient for the EUR, JPY and GBP.

Suggested Citation

  • Hsien-Yi Lee & Khatanbaatar Sodoikhuu, 2012. "Efficiency Tests in Foreign Exchange Market," International Journal of Economics and Financial Issues, Econjournals, vol. 2(2), pages 216-224.
    • Handle: RePEc:eco:journ1:2012-02-9
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    References listed on IDEAS

    as
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    Cited by:

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    2. Rizwana Bashir & Rabia Shakir & Badar Ashfaq & Atif Hassan, 2014. "The Efficiency of Foreign Exchange Markets in Pakistan: An Empirical Analysis," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 19(1), pages 133-149, Jan-June.
    3. Murugesan Selvam & Amirdha Vasani Sankarkumar & Balasundaram Maniam & Marxia Oli Sigo, 2017. "Long memory features and relationship stability of Asia-Pacific currencies against USD," Business and Economic Horizons (BEH), Prague Development Center, vol. 13(1), pages 97-109, March.
    4. Liu, Zhenya & Zhan, Yaosong, 2022. "Investor behavior and filter rule revisiting," Journal of Behavioral and Experimental Finance, Elsevier, vol. 33(C).
    5. Petr Zeman, 2014. "Technical Trading and Testing of Intra-day Market Efficiency in the Foreign Exchange Market," Acta Universitatis Bohemiae Meridionales, University of South Bohemia in Ceske Budejovice, vol. 17(1), pages 3-13.
    6. Dietmar Janetzko, 2014. "Predictive modeling in turbulent times – What Twitter reveals about the EUR/USD exchange rate," Netnomics, Springer, vol. 15(2), pages 69-106, September.
    7. Gofaone Matebejana & Gaotlhobogwe Motlaleng & James Juana, 2017. "Foreign Exchange Market Efficiency In Botswana," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 19, pages 55-74, June.
    8. Ornela Shalari & Areti Stringa, 2013. "Testing The Foreign Exchange Market Efficiency For Euro / Albanian Leke During The Period 01 January 2002 – 31 December 2012," EuroEconomica, Danubius University of Galati, issue 1(32), pages 126-135, May.
    9. Dietmar Janetzko, 2014. "Using Twitter to Model the EUR/USD Exchange Rate," Papers 1402.1624, arXiv.org.

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    More about this item

    Keywords

    Filter rule; Foreign exchange; Market efficiency;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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