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A Simple Test of Momentum in Foreign Exchange Markets

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  • José Eduardo Gómez-González
  • Andrés F. García-Suaza

Abstract

This study proposes a new method for testing for the presence of momentum in nominal exchange rates, using a probabilistic approach. Using data for eight emerging economies, we show evidence of exchange rate inertia; however, the presence of momentum is asymmetric, being stronger in moments of currency depreciation than in moments of appreciation. This behavior may be associated with central bank intervention.

Suggested Citation

  • José Eduardo Gómez-González & Andrés F. García-Suaza, 2012. "A Simple Test of Momentum in Foreign Exchange Markets," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 48(5), pages 66-77, September.
  • Handle: RePEc:mes:emfitr:v:48:y:2012:i:5:p:66-77
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Loaiza-Maya, Rubén Albeiro & Gómez-González, José Eduardo & Melo-Velandia, Luis Fernando, 2015. "Exchange rate contagion in Latin America," Research in International Business and Finance, Elsevier, pages 355-367.
    2. Loaiza-Maya, Rubén Albeiro & Gómez-González, José Eduardo & Melo-Velandia, Luis Fernando, 2015. "Exchange rate contagion in Latin America," Research in International Business and Finance, Elsevier, pages 355-367.

    More about this item

    Keywords

    emerging economies; foreign exchange markets; hazard duration analysis; momentum;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies

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