scholarly journals Efficiency of the Black Foreign Exchange Market

2019 ◽  
Vol 11 (2) ◽  
pp. 165
Author(s):  
Ali Farhan Chaudhry ◽  
Mian Muhammd Hanif ◽  
Sameera Hassan ◽  
Muhammad Irfan Chani
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Weak Form ◽  
Exchange Rate Policy ◽  
Foreign Exchange Rate ◽  
Ratio Test ◽  
Exchange Market ◽  
Policy Makers

This empirical study is first of its nature to examine the weak-form of efficiency for unofficial foreign exchange market of Pakistan proxied by Japanese Yen (JPY/PKR), Swiss Franc (CHF/PKR), British Pound (GBP/PKR), and US Dollar (USD/PKR) exchange rates. For this we have employed Ljung Box Q-test, unit root tests including Dickey-Fuller (Dickey 1979), Augmented Dickey-Fuller (Dickey 1981) tests and Phillips and Perron (1988) test, Durbin Watson test, Runs-test, and Variance ratio test by using unofficial foreign exchange rate time series of Yen/PKR, CHF/PKR, GBP/PKR and USD/PKR from 1994M07 to 2001M06. Empirical results lead to the conclusion that the unofficial foreign exchange market of Pakistan is weak-form efficiency. The implications of this empirical research are of great importance for designing foreign exchange policy i.e. policy makers (be it accounting, export/import or public policy makers) are to consider fluctuations in unofficial foreign exchange rates while designing official foreign exchange rate policy of developing country like Pakistan. Further, policymakers can enhance the efficiency of official foreign exchange market by intervention subject to a widening of unofficial foreign exchange premium beyond a certain limit in developing countries like Pakistan.

Testing Random Walk Hypothesis in Turkish Foreign Exchange Market

2015 ◽  
pp. 51-63
Author(s):  
Levent Çıtak ◽  
Veli Akel ◽  
Murat Çetin
Keyword(s):  
Exchange Rate ◽  
Random Walk ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Weak Form ◽  
Efficient Market Hypothesis ◽  
Ratio Test ◽  
Exchange Market ◽  
Developed Economies ◽  
Random Walk Hypothesis

This chapter revisits the empirical validity of the weak-form efficient market hypothesis for Turkish foreign exchange markets. The random-walk hypothesis in foreign-exchange rates market is one of the most researched areas, particularly in developed economies. This chapter applies ADF and PP unit root test, Lo and MacKinlay's (1988) conventional variance ratio test and Ljung-Box Q tests to examine the validity of the random-walk hypothesis in the Turkish foreign-exchange market. The chapter utilizes weekly nominal TRY/USD exchange rate for data from January 2000 to December 2013. The results provide evidence rejecting the random walk hypothesis for weekly nominal exchange rate series.

Testing Random Walk Hypothesis in Turkish Foreign Exchange Market

2016 ◽  
pp. 969-982
Author(s):  
Levent Çıtak ◽  
Veli Akel ◽  
Murat Çetin
Keyword(s):  
Exchange Rate ◽  
Random Walk ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Weak Form ◽  
Efficient Market Hypothesis ◽  
Ratio Test ◽  
Exchange Market ◽  
Developed Economies ◽  
Random Walk Hypothesis

This chapter revisits the empirical validity of the weak-form efficient market hypothesis for Turkish foreign exchange markets. The random-walk hypothesis in foreign-exchange rates market is one of the most researched areas, particularly in developed economies. This chapter applies ADF and PP unit root test, Lo and MacKinlay's (1988) conventional variance ratio test and Ljung-Box Q tests to examine the validity of the random-walk hypothesis in the Turkish foreign-exchange market. The chapter utilizes weekly nominal TRY/USD exchange rate for data from January 2000 to December 2013. The results provide evidence rejecting the random walk hypothesis for weekly nominal exchange rate series.

scholarly journals The “day-of-the-week” effects in the exchange rate of Latin American currencies

2019 ◽  
Vol 14 (PNEA) ◽  
pp. 485-507
Author(s):  
Roberto Joaquín Santillán Salgado ◽  
Alejandro Fonseca Ramírez ◽  
Luis Nelson Romero
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Foreign Exchange ◽  
Latin American ◽  
Foreign Exchange Market ◽  
The United States ◽  
Management Decision ◽  
Exchange Market ◽  
Day Of The Week ◽  
The Exchange Rate

This paper examines the “day-of-the-week” anomaly in the foreign exchange market of six major Latin American countries’ currencies: (Argentina, Brazil, Chile, Colombia, Mexico, and Peru), all with respect to the United States’ dollar. The returns of daily exchange rates are stationary, so we use linear regressions combined with GARCH, TARCH and EGARCH models to explore the presence of the “day-of-the-week” anomaly. The results confirm the presence of “abnormal” effects in some of the currencies and in some days of the week, particularly on Fridays and Mondays. Moreover, volatility in exchange rates shows clustering behavior, as well as leverage effects, which are carefully modelled in our analysis. This paper contributes to the literature by studying the “day-of-the-week” effects in currency exchange rate markets, a clear innovation with respect to the typical stock market analysis. The results reported are useful for foreign exchange market traders, currency exposure management decision makers, monetary authorities, and financial policy designers in the countries included in the study. Indeed, the results suggest the presence of a typical behavior of the exchange rate of all the currencies included in the sample.

Volatility Spillover Structure of Stock and Foreign Exchange Market between Korea, Japan, and Hong Kong

2006 ◽  
pp. 162-182
Author(s):  
Masayuki Susai
Keyword(s):  
Exchange Rate ◽  
Stock Returns ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Exchange Rate Volatility ◽  
Foreign Exchange Rate ◽  
Volatility Spillover ◽  
Exchange Market ◽  
Portfolio Risk ◽  
International Portfolio

Highly developed IT technology can be the source of volatility spillover between markets located in other countries. In this chapter, we investigate the interrelationship between stock returns in North East Asian countries and the effect of foreign exchange rate volatility on the interrelationship between stock returns. We bring out clear simultaneous interrelationship between stock return and foreign exchange volatility. Focusing on covariance of each asset returns, if we do not take foreign exchange rate volatility into account when we evaluate our international portfolio, the portfolio risk might be underevaluated. The analysis shows that foreign exchange market turbulence might be accompanied by increase in covariance between stock returns. Just after the Asian currency crisis, the relationship between stock returns and foreign exchange turbulence might have changed. For managing international portfolio risk, we should be aware of foreign exchange risk and structural change in covariance between stock returns.

scholarly journals The foreign exchange market in Barcelona at the beginning of the fifteenth century

2021 ◽  
pp. 1-28
Author(s):  
Angela Orlandi ◽  
Giacomo Toscano
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Fifteenth Century ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Exchange Rate Volatility ◽  
Exchange Market ◽  
Macroeconomic Factors ◽  
Local Currency ◽  
European Markets

Based on the reconstruction of the monetary flows of a merchant-banking company operating in Barcelona at the beginning of the fifteenth century, this study aims to understand the reasons behind exchange-rate variations in the local currency with respect to the principal European markets, as well as the modalities and predictability of such oscillations. By using real rather than ‘hearsay’ rates, we present new assessments of the seasonal character of exchange rates and their sensitivity to conditions of currency abundance or shortage. In addition, econometric analysis shows that exchange-rate volatility was quite modest and dependent on geographic and macroeconomic factors, such as the system of commercial flows.

An Estimation of Target Effective Exchange Rates: The Case of the U.S.

1992 ◽  
Vol 36 (1) ◽  
pp. 22-28 ◽  
Author(s):  
Nicholas Apergis
Keyword(s):  
Exchange Rates ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Exchange Market ◽  
Central Bank Intervention ◽  
Policy Makers ◽  
Us Economy ◽  
Considerable Research ◽  
The Us ◽  
Effective Exchange

This paper derives optimal effective exchange rates, via loss-function minimization, for the US economy. The results attract considerable research interest; although it is generally believed that policy makers intervene only in infrequent emergency occasions in the foreign exchange market, this paper shows that the contrary is true; the US foreign exchange market is characterized by frequent central bank intervention.

scholarly journals A Comparative Analysis of Weak and Semi-Strong Form Efficiency of Nigerian and South African Foreign Exchange Market

2021 ◽  
Vol 04 (07) ◽  
Author(s):  
Adetan, Taiwo Temitayo ◽  
Keyword(s):  
Exchange Rates ◽  
South African ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Weak Form ◽  
Strong Form ◽  
Exchange Market ◽  
Market Participants ◽  
Available Information ◽  
Weak Form Efficiency

Foreign exchange market is said to be efficient if all available information are reflected in its exchange rates. An efficient foreign exchange translates to absence of profitable and exploitable trends which means that it is impossible for market participants or private agents to outperform the market. This study investigated the weak and semi-strong form efficiency of Nigerian and South African foreign exchange market to determine the significance of past exchange rates in predicting the present rate which is the test of weak form efficiency and it examined the co-integration relationships between selected pairs of exchange rate to determine the semi-strong efficiency. The secondary data used in this study were sourced mainly from the Central Bank of Nigeria Statistical Bulletin, the South African Reserve Bank Bulletin and the oanda exchange rate websites. The data used were the inter-bank spot exchange rates of Naira and Rand to Swiss Franc, Euro, Pounds, Dollar and Yen for the period of January 2010 to December 2017. The Augmented Dickey Fuller (ADF) test and the Phillip Peron (PP) test were employed to determine the weak form efficiency while the Variance Decomposition, Granger Causality and Co-integration tests were used to determine the semi-strong form efficiency of both countries. The results of the study revealed that the Nigerian foreign exchange market is efficient in the weak and semi-strong form at 5% level of significance while the weak form efficiency of South African foreign exchange market revealed mixed results. The market is efficient in the weak form except for the case of Rand to Dollar and Rand to Yen which showed inefficiency. The market is equally efficient in semi-strong form. The study concluded that market participants cannot make exploitable profits by trading in both markets because all past and publicly available information are already incorporated in the prices of exchange rates. It was therefore recommended that the inter-bank market in both countries should be well monitored and managed by the regulatory authorities so as to promote the effective and efficient smooth functioning of the foreign exchange market as well as achieving a stable and realistic exchange rates.

scholarly journals The microstructure of foreign exchange rate and foreign exchange rate formation

2005 ◽  
Vol 50 (164) ◽  
pp. 63-79
Author(s):  
Vladimir Vuckovic
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Market Microstructure ◽  
Foreign Exchange Market ◽  
Foreign Currency ◽  
Stock Exchange ◽  
Foreign Exchange Rate ◽  
Exchange Market ◽  
Market Participants ◽  
Essential Question

The subject matter of market microstructure analysis are processes through which investor activities are transferred to quantities and prices. This direction indicates the fact that has been unjustifiably neglected in fundamental theories ? foreign exchange rate results from the interactions between market participants. Spot foreign exchange market can best be described as a decentralised market with a number of dealers. There is no organised physical place (stock exchange) where dealers meet their clients nor is there an electronic system which enables quotations of all dealers in a currency market to be simultaneously shown on the screen. The theory of order flows has resulted from the answer to the essential question of market microstructure: do trading mechanisms affect the price formation process of the trading subject, and how do they affect it. Information is scattered and not available to all subjects in an aggregate form, which is the consequence of a decentralised structure, lack of regulations and nontransparent trading on the foreign exchange market. In such a setting, market participants are incessantly aggregating signals based on scattered information, and no sooner than collective orders for foreign currency sales and purchases are formed do they build into the foreign exchange rate in the process of new information trading. are a good explanation for changes in the foreign exchange rate. Several studies have shown that order flows.

scholarly journals Foreign Exchange Market Efficiency In Botswana

2017 ◽  
Vol 10 (1) ◽  
pp. 103-125 ◽  
Author(s):  
Gofaone Matebejana ◽  
Gaotlhobogwe Motlaleng ◽  
James Juana
Keyword(s):  
Random Walk ◽  
Exchange Rates ◽  
Foreign Exchange ◽  
Unit Root ◽  
Foreign Exchange Market ◽  
Weak Form ◽  
Strong Form ◽  
Unit Root Tests ◽  
Exchange Market ◽  
Weak Form Efficiency

Abstract The random walk behaviour of exchange rates in Botswana’s foreign exchange market is explored by employing unit root tests. The unit root tests employed include the ADF, PP and the KPSS. This paper uses monthly data for the period 2000:01 to 2015:12. The conclusive evidence based on the unit roots tests indicates that the behaviour of the Pula against the South African Rand, Japanese Yen and the American Dollar exchange rates is consistent with the random walk process and the weak form efficiency market hypothesis. However, the Pula against the British Pound is inconsistent with the weak form efficiency market hypothesis. These results compliment those from Namibia (Mabakeng and Sheefeni, 2014). Furthermore, there is no evidence of the semi-strong form level of efficiency as revealed by the cointegration results obtained. These results corroborates with those found by Wickremasinghe (2008) and Çiçek (2014) in which weak form was found to exist whilst the semi-strong form was found not to exist. This paper has filled an important gap as it is the first study to investigate the efficiency of the foreign exchange market in Botswana.

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