Efficiency Of Foreign Exchange Markets: A Developing Country Perspective
AbstractThis study tests weak and semi-strong form efficiency of the foreign exchange market in Sri Lanka using six bilateral foreign exchange rates during the recent float. Weak-form efficiency is examined using unit root tests while semi-strong form efficiency is tested using co- integration and Granger causality tests and variance decomposition analysis. Results indicate that the Sri Lankan foreign exchange market is consistent with the weak -form of the Efficient Market Hypothesis. However, the results provide evidence against the semi - strong version of the Efficient Market hypothesis. These results have important implications for government policy makers and participants in the foreign exchange market of Sri Lanka.
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Bibliographic InfoPaper provided by EconWPA in its series International Finance with number 0406004.
Length: 24 pages
Date of creation: 16 Jun 2004
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Note: Type of Document - pdf; pages: 24
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Efficient market hypothesis; Sri Lanka; foreign exchange market; Japanese yen; Variance decomposition;
Find related papers by JEL classification:
- F31 - International Economics - - International Finance - - - Foreign Exchange
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
This paper has been announced in the following NEP Reports:
- NEP-AFR-2004-06-22 (Africa)
- NEP-ALL-2004-06-22 (All new papers)
- NEP-FIN-2004-06-29 (Finance)
- NEP-IFN-2004-06-22 (International Finance)
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