Market efficiency of floating exchange rate systems: Some evidence from Pacific-Asian countries

Osamah M. Al-Khazali, Guillaume Leduc and Chong Soo Pyun

Global Finance Journal, 2011, vol. 22, issue 2, 154-168

Abstract: This paper examines the random walk hypothesis (RWH) and the martingale difference hypothesis (MDH) for the Australian dollar and five Asian emerging currencies relative to three benchmark currencies. We use Wright's (2000) non-parametric procedure to test the RWH and Kuan and Lee's (2004) procedure to test the MDH. The results of Wright's tests and Kuan and Lee's test are adjusted for size distortion. The RWH is rejected for all currencies before and after the Asian crisis. The results of Kuan and Lee's test are consistent with the fact that the RWH is more stringent than the MDH. For the three testing periods, the MDH fails to reject the AUD. For all other currencies the MDH is rejected at least for one benchmark over two periods, indicating that the market efficiency in these markets have not significantly improved under the floating rate systems following the Asian financial crisis.

Keywords: Efficiency of foreign exchange markets; Random walk; Martingale difference hypothesis; Emerging currency markets (search for similar items in EconPapers)
JEL-codes: F31 G14 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:22:y:2011:i:2:p:154-168

DOI: 10.1016/j.gfj.2011.10.005

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