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Are exchange rates serially correlated? New evidence from the Euro FX markets
Author(s) -
Cheung Adrian WaiKong,
Su JenJe,
Choo Astrophel Kim
Publication year - 2012
Publication title -
review of financial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.347
H-Index - 41
eISSN - 1873-5924
pISSN - 1058-3300
DOI - 10.1016/j.rfe.2011.12.001
Subject(s) - autocorrelation , heteroscedasticity , econometrics , economics , exchange rate , lag , efficient market hypothesis , mathematics , statistics , monetary economics , biology , computer science , paleontology , horse , stock market , computer network
This paper examines the serial uncorrelatedness hypothesis in the Euro FX markets by testing for autocorrelation in daily FX returns of 82 countries over the period of 1999–2010. We use three newly developed tests that are robust to conditional heteroskedasticity of unknown forms and that do not choose a lag parameter arbitrarily. They are Escanciano & Lobato (2009)'s automatic Box–Pierce Q p test, Nankervis & Savin (2010)'s generalized Andrews–Ploberger test and Deo (2000)'s robust Durlauf test. We find no significant autocorrelation in the FX returns of around 58 to 62 countries, suggesting that majority of the Euro FX markets are weak‐form efficient.