Title

The Opening Price Behavior: Foreign Exchange Futures Market Versus Equity Market

Publication Type

Journal Article

Publication Date

1997

Abstract

Daily opening, noon, and closing prices of Deutschemark and Japanese yen futures are examined for the efficiency of the foreign exchange futures (FXF) market. Variance ratio and multiple variance ratio tests, are employed. The prices are found to be serially uncorrelated. This random walk behavior sheds light on the differences between the FXF and commodity or equity markets. The conclusions suggest that the FXF market is a 24-hour global market, reflecting a disparity with equity markets where round-the-clock trading is advocated since the high volatility during market opening would be eliminated, leading to potential cost reductions for traders as spreads are lowered.

Discipline

Business

Research Areas

Finance

Publication

International Review of Financial Analysis

Volume

6

Issue

1

First Page

21

Last Page

35

ISSN

1057-5219

Identifier

10.1016/s1057-5219(97)90017-x

Publisher

Elsevier