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Testing for Random Walk Behavior in Euro Exchange Rates

Amelie Charles and Olivier Darné

Economie Internationale, 2009, issue 119, 25-45

Abstract: This study examines the random walk behavior of major Euro exchange rates. The hypothesis is tested with new variance ratio tests based on power transformation and multiple ranks from daily and weekly data. We find that Euro exchange rates for the major trading countries follow the random walk hypothesis, and therefore are significantly weak-form efficient. This outcome is not necessarily the case for non-major trading currencies, especially for the Swedish kroner, where the random walk hypothesis is rejected at the daily and weekly frequencies.

Keywords: Exchange market efficiency; euro exchange rates; random walk; variance ratio test (search for similar items in EconPapers)
JEL-codes: G14 G15 C14 (search for similar items in EconPapers)
Date: 2009
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Working Paper: Testing for random walk behavior in euro exchange rates (2009)
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