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DO AUSTRALIAN SPOT FOREIGN EXCHANGE RATES STILL SHOW EVIDENCE OF COINTEGRATION?
Author(s) -
Bhar Ramaprasad
Publication year - 1995
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/j.1467-629x.1995.tb00293.x
Subject(s) - cointegration , foreign exchange market , economics , currency , float (project management) , spot contract , sophistication , monetary economics , foreign exchange , contrast (vision) , treasury , liberian dollar , financial economics , econometrics , finance , social science , management , archaeology , sociology , futures contract , artificial intelligence , computer science , history
Informational efficiency in the Australian spot foreign exchange market has been examined by other authors, but most of these studies examine a time span that covers the immediate post‐float period. This article analyses a period that begins nearly three and a half years after the floating of the Australian dollar and applies Johansen's test to detect any cointegrating relationship in a system of five foreign currencies. It finds no evidence of cointegration and, therefore, supports the proposition of informational efficiency in the foreign exchange market. This result is in contrast to most other such studies of the Australian market and may be partly due to the increasing maturity and sophistication of the market participants in dealing with a floating currency.