EconPapers    
Economics at your fingertips  
 

A Note on the Foreign Exchange Market Efficiency Hypothesis: Does Small Sample Bias affect Inference?

Haitham Al-Zoubi () and Elton Daal
Additional contact information
Elton Daal: University of New Orleans

No 2005-06, Working Papers from University of New Orleans, Department of Economics and Finance

Abstract: This study examines whether small sample bias affects the standard inference about the foreign exchange market efficiency hypothesis. Our findings indicate that the bias is large enough to result in rejection of the efficient market hypothesis even when it is true. We use bootstrapping to adjust for the bias and find that the hypothesis cannot be rejected for the Swiss franc and French franc. We also find that the bias plays a significant role in the inference that expectation error causes inefficiency in the foreign exchange markets. After bias adjustment, the rational expectation hypothesis holds even at one month-horizon.

Keywords: Market Efficiency Hypothesis; Rational Expectation Hypothesis; Risk Premium; Small Sample Bias; Bootstrapping (search for similar items in EconPapers)
JEL-codes: G14 C12 C22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-fin, nep-fmk and nep-ifn
Date: 2005-08-27
References: Add references at CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://louisdl.louislibraries.org/cgi-bin/showfile.exe?CISOROOT=/EFW&CISOPTR=32 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to louisdl.louislibraries.org:80

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:uno:wpaper:2005-06

Access Statistics for this paper

More papers in Working Papers from University of New Orleans, Department of Economics and Finance Contact information at EDIRC.
Bibliographic data for series maintained by Janet Murphy Crane ().

 
Page updated 2018-09-18
Handle: RePEc:uno:wpaper:2005-06