The foreign exchange market efficiency hypothesis revisited
The foreign exchange market efficiency hypothesis is revisited using the modern Phillips-Hansen Fully Modified Ordinary Least squares (FM-OLS) procedure. It corrects for both endogeneity in the data and asymptotic bias in the coefficient estimates. The volatile decade of the 1980s is the chosen sample. The necessary and sufficient condition for market efficiency/unbiasedness is tested by sequentially conducting the Phillips-Ouliaris non-stationarity test on the residuals and the FM-WALD test for the required parameter values. Across the board evidence is found supporting cointegration between future spot rates and forward rates, i.e. the necessary condition is satisfied. But both the necessary and sufficient condition is supported for two out of four currencies, presumably due to the presence of the risk premium and/or market imperfections.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 2 (1995)
Issue (Month): 9 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RAEL20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RAEL20|
When requesting a correction, please mention this item's handle: RePEc:taf:apeclt:v:2:y:1995:i:9:p:311-315. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If references are entirely missing, you can add them using this form.