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Efficiency of the foreign exchange markets in South Asian Countries

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Author Info
Abullah M. Noman () (, American International University-Bangladesh (AIUB))
Minhaz U. Ahmed (Southeast University, Bangladesh)

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Abstract

This paper examines the weak form efficiency of the foreign exchange markets in seven SAARC countries using monthly return series for each of these markets over a period of 21 years (1985-2005). We applied a battery of unit root tests and variance ratio tests (individual and multiple) to see whether the return series (and also, the raw data) follow random walk process. Our results suggest that the increments of the return series are not serially correlated. Therefore, we conclude that foreign exchange markets in SAARC countries are weak form efficient.

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Publisher Info
Paper provided by American International University-Bangladesh, Office of Research and Publications (ORP) in its series AIUB Bus Econ Working Paper Series with number AIUB-BUS-ECON-2008-18.

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Length: 15
Date of creation: Jun 2008
Date of revision: Jun 2008
Handle: RePEc:aiu:abewps:62

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  1. Aron, Janine & Ayogu, Melvin, 1997. "Foreign Exchange Market Efficiency Tests in Sub-Saharan Africa," Journal of African Economies, Oxford University Press, vol. 6(3), pages 150-92, Supplemen.
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  6. Whang, Yoon-Jae & Kim, Jinho, 2003. "A multiple variance ratio test using subsampling," Economics Letters, Elsevier, vol. 79(2), pages 225-230, May. [Downloadable!] (restricted)
  7. Smith, Graham & Jefferis, Keith & Ryoo, Hyun-Jung, 2002. "African Stock Markets: Multiple Variance Ratio Tests of Random Walks," Applied Financial Economics, Taylor and Francis Journals, vol. 12(7), pages 475-84, July. [Downloadable!] (restricted)
  8. Graham Smith & Hyun-Jung Ryoo, 2003. "Variance ratio tests of the random walk hypothesis for European emerging stock markets," European Journal of Finance, Taylor and Francis Journals, vol. 9(3), pages 290-300, June. [Downloadable!] (restricted)
  9. Kawakatsu, Hiroyuki & Morey, Matthew R, 1999. "An Empirical Examination of Financial Liberalization and the Efficiency of Emerging Market Stock Prices," Journal of Financial Research, Southern Finance Association and Southwestern Finance Association, vol. 22(4), pages 385-411, Winter.
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  12. Wu, Jyh-Lin & Chen, Show-Lin, 1998. "Foreign exchange market efficiency revisited," Journal of International Money and Finance, Elsevier, vol. 17(5), pages 831-838, October. [Downloadable!] (restricted)
  13. Buguk, Cumhur & Wade Brorsen, B., 2003. "Testing weak-form market efficiency: Evidence from the Istanbul Stock Exchange," International Review of Financial Analysis, Elsevier, vol. 12(5), pages 579-590. [Downloadable!] (restricted)
  14. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May. [Downloadable!] (restricted)
  15. Coleman, Mark, 1990. "Cointegration-based tests of daily foreign exchange market efficiency," Economics Letters, Elsevier, vol. 32(1), pages 53-59, January. [Downloadable!] (restricted)
  16. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-36, July. [Downloadable!] (restricted)
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  17. Lee, Chun I. & Pan, Ming-Shiun & Liu, Y. Angela, 2001. "On market efficiency of Asian foreign exchange rates: evidence from a joint variance ratio test and technical trading rules," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 11(2), pages 199-214, June. [Downloadable!] (restricted)
  18. Chow, K. Victor & Denning, Karen C., 1993. "A simple multiple variance ratio test," Journal of Econometrics, Elsevier, vol. 58(3), pages 385-401, August. [Downloadable!] (restricted)
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