Is the dollar/ECU exchange rate a random walk?

Paul Newbold, Toni Rayner, Neil Kellard (nkellard@essex.ac.uk) and Christine Ennew

Applied Financial Economics, 1998, vol. 8, issue 6, 553-558

Abstract: Monthly data on the $US/ECU exchange rate are analysed in light of the random walk hypothesis. A battery of tests, including procedures that are robust to conditional heteroscedasticity, are applied against linear alternatives to departures from the random walk. These tests are all based on the sample autocorrelations of the series of first differences of the logarithm of the monthly exchange rate. They were applied to the full sample of available data, and also to a subsample consisting of the most recent observations. On the whole, these tests provided just modest evidence against the random walk hypothesis.

Date: 1998
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DOI: 10.1080/096031098332583

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