Rationality of survey data and tests for market efficiency in the foreign exchange markets

Peter C. Liu · Gangadharrao S. Maddala

140 citations0/0 files storedJournal of International Money and Finance

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Financial Markets and Investment Strategies Monetary Policy and Economic Impact Economic theories and models

Abstract

This paper tests the rational expectations hypothesis (REH) and the market efficiency hypothesis (MEH) in the foreign exchange markets, using survey data on expectations. Our results show that the spot exchange rates, expected exchange rates, and the forward rates all follow a random walk process. Hence, the cointegration theory is employed to test the REH and MEH. All the test statistics support the REH but fail to support the MEH. We use survey data on expectations to identify the causes behind this failure of the MEH. (JEL F31, G14).

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 140 citations exist upstream.

References

1987Co-Integration and Error Correction: Representation, Estimation, and Testing 1988Testing for a Unit Root in Time Series Regression 1990Inference in Linear Time Series Models with some Unit Roots 1981Some properties of time series data and their use in econometric model specification 1980Forward Exchange Rates as Optimal Predictors of Future Spot Rates: An Econometric Analysis 1990Asymptotic Properties of Residual Based Tests for Cointegration 1991Pitfalls and Opportunities: What Macroeconomists Should Know about Unit Roots 1988Tests For Unit Roots: A Monte Carlo Investigation

Cited by

1999Random Walks and Market Efficiency Tests: Evidence from Emerging Equity Markets 1994Unbiasedness and time varying risk premia in the crude oil futures market 2000Expectations Formation and Risk in Three Financial Markets: Surveying What the Surveys Say 1994Patterns in Exchange Rate Forecasts for Twenty-Five Currencies 2007Professional forecasts of interest rates and exchange rates: Evidence from the Wall Street Journal’s panel of economists

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.