Market Efficiency and Apparent Unit Roots: An Application to Exchange Rates

Michael Bleaney

The Economic Record, 1998, vol. 74, issue 225, 139-144

Abstract: Prices in efficient markets are influenced by trading based on past patterns in the series. This induces parameter instability and near‐random‐walk behaviour in any time‐series model of such data. Simulation results suggest that this parameter instability makes stationary series more likely to be erroneously classified as nonstationary, according to standard unit root or stationarity tests. It is shown that individual real exchange rate series appear individually non‐stationary, especially for tests based on a null of stationarity, even though they appear stationary when treated as a panel.

Date: 1998
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://doi.org/10.1111/j.1475-4932.1998.tb01911.x

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:ecorec:v:74:y:1998:i:225:p:139-144

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0013-0249

Access Statistics for this article

The Economic Record is currently edited by Paul Miller, Glenn Otto and Martin Richardson

More articles in The Economic Record from The Economic Society of Australia Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().