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Efficiency Of Foreign Exchange Markets: A Developing Country Perspective

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  • Guneratne Banda Wickremasinghe

    (Monash University)

Abstract

This 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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File URL: http://128.118.178.162/eps/if/papers/0406/0406004.pdf
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Bibliographic Info

Paper provided by EconWPA in its series International Finance with number 0406004.

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Length: 24 pages
Date of creation: 16 Jun 2004
Date of revision:
Handle: RePEc:wpa:wuwpif:0406004

Note: Type of Document - pdf; pages: 24
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Web page: http://128.118.178.162

Related research

Keywords: Efficient market hypothesis; Sri Lanka; foreign exchange market; Japanese yen; Variance decomposition;

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References

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Citations

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Cited by:
  1. Van Heerden, Dorathea & Rodrigues, Jose & Hockly, Dale & Lambert, Bongani & Taljard, Tjaart & Phiri, Andrew, 2013. "Efficient Market Hypothesis in South Africa: Evidence from a threshold autoregressive (TAR) model," MPRA Paper 50544, University Library of Munich, Germany.
  2. Nikolaos Giannellis & Athanasios Papadopoulos, 2006. "Testing for Efficiency in Selected Developing Foreign Exchange Markets: An Equilibrium-based Approach," Working Papers 0717, University of Crete, Department of Economics.
  3. Felicia Ramona Birau, 2012. "Econometric Approach Of Heteroskedasticity On Financial Time Series In A General Framework," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 4, pages 74-77, December.
  4. repec:pid:wpaper:2012:82 is not listed on IDEAS
  5. 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.

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