 Random Walks in Daily Foreign Exchange Rates? The Case of Lebanon (2010-2015)Samih Antoine Azar and Tamar Kohilian Applied Economics and Finance, 2015, vol. 2, issue 3, 119-126 Abstract: In most of the academic literature on asset prices, like equities or foreign exchange, the words weak-form efficiency and random walk are used interchangeably. This paper makes a distinction between these two concepts. Weak-form efficiency holds when price increments are independent and random. A random walk is more stringent: it requires that the probability distribution of price increments be identical and normal, in addition of being independent. As expected the null hypothesis of a random walk is rejected with force while the null of weak-form efficiency is not. This implies that linear filter rules, chartism, and technical analysis cannot produce abnormal profits. But this implies also that non-linear filter rules, chartism, and technical analysis can be profitable. This explains the reality of finding departments of technical analysis in most Lebanese banks. If the market experience of Lebanon is generalized to other countries this would explain why international banks also have such departments. Keywords: daily foreign exchange rates; weak-form efficiency; random walk; independent; identical; and normal distribution; Lebanon (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:rfa:aefjnl:v:2:y:2015:i:3:p:119-126 Access Statistics for this article More articles in Applied Economics and Finance from Redfame publishing Contact information at EDIRC. |
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