Publication Type
Journal Article
Version
publishedVersion
Publication Date
1-1997
Abstract
There is considerable interest in whether exchange rates behave like martingales. Liu and He tested the martingale hypothesis for exchange rates using the variance-ratio methodology of Lo and MacKinlay. They found that exchange rates have violated the martingale property since the inception of floating rates in 1973. Liu and He did not consider the joint implications of their tests, however. In this article, we reassess the martingale hypothesis for exchange rates using the joint tests developed by Hochberg and by Richardson and Smith. Contrary to the findings of Liu and He, the joint tests indicate that the martingale model worked quite well for exchange rates in the recent years of the floating-rate regime.
Keywords
Exchange rates, multiple-comparisons tests, overlapping observations
Discipline
Finance and Financial Management
Research Areas
Finance
Publication
Journal of Business and Economic Statistics
Volume
15
Issue
1
First Page
51
Last Page
59
ISSN
0735-0015
Identifier
10.1080/07350015.1997.10524686
Publisher
Taylor and Francis
Citation
FONG, Wai Mun; KOH, Benedict Seng Kee; and Ouliaris, Sam.
Joint Variance Ratio Tests of the Martingale Hypothesis for Exchange Rates. (1997). Journal of Business and Economic Statistics. 15, (1), 51-59.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/2186
Copyright Owner and License
Publisher
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1080/07350015.1997.10524686