재무연구 제 권 호 (2009년 5월)
Asian Review of Financial Research, Vol., No..
pp.1698~1727
pp.1698~1727
Random Walk and Martingale Difference Hypotheses for Pacific Basin Foreign Exchange Markets
Osamah M. Al-Khazali Accounting and Finance Department School of Business and Management American University of Sharjah Sharjah, U.A.E.
Chong Soo Pyun Department of Finance University of Memphis Memphis, TN 38152
This paper examines the random walk (RW) and the martingale difference sequence (MDS) processes for the Australian dollar and seven Asian currencies relative to three benchmark currencies between 1993 and 2008. We use Wright’s (2000) non-parametric variance ratio test for the RW and Kuan and Lee’s (2004) test for the MDS. The results show that (i) the hypotheses of RW and MDS are rejected for all eight currencies for the entire study period as well as for the sub-period leading up to the Asian financial crisis in 1997; (ii) for the sub-period following the Asian crisis, only the Australian dollar and Korean won behave as weak-form efficient while the six other Asian emerging currencies show no discernible improvement toward market efficiency; (iii) on balance, the rejection of random walk is more robust by Kuan and Lee’s martingale test as compared to that by Wright’s sign and rank variance ratio test.
Osamah M. Al-Khazali
Chong Soo Pyun
This paper examines the random walk (RW) and the martingale difference sequence (MDS) processes for the Australian dollar and seven Asian currencies relative to three benchmark currencies between 1993 and 2008. We use Wright’s (2000) non-parametric variance ratio test for the RW and Kuan and Lee’s (2004) test for the MDS. The results show that (i) the hypotheses of RW and MDS are rejected for all eight currencies for the entire study period as well as for the sub-period leading up to the Asian financial crisis in 1997; (ii) for the sub-period following the Asian crisis, only the Australian dollar and Korean won behave as weak-form efficient while the six other Asian emerging currencies show no discernible improvement toward market efficiency; (iii) on balance, the rejection of random walk is more robust by Kuan and Lee’s martingale test as compared to that by Wright’s sign and rank variance ratio test.
Efficiency of foreign exchange markets,Random walk and martingale difference hypotheses,E emerging currency markets
