Currency Market Efficiency Revisited: Evidence from Korea

Kang, Min-woo

doi:10.3390/ijfs7030052

Cited by 3 publications

(2 citation statements)

References 31 publications

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“…Intrinsically, a shock to the swap rate will result in an unequal response from the spot rate. These findings coincide with those of several other studies (Kang, 2019;Mwangi and Duncan, 2012). It then follows that with the dollar as the reserve currency, there are opportunities for arbitrageurs to make profits off exchange rate disequilibrium, ceteris paribus.…”

Section: Fruh Empirical Resultssupporting

confidence: 93%

Dedollarization and market efficiency: A trade arbitrage perspective in the BRICS and WAEMU nations

Chunga,

Ping

2024

Preprint

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This paper appraises the dedollarization and market efficiency of BRICS and WAEMU nations with due reference to the trade arbitrage perspective. Using daily policy rates, spot rates and forward rates from January 2015 to March 2023, the study uses a trio approach: Hurst exponent analysis vis-à-vis sentimental analysis, FRUH analysis and CIP analysis. Hurst exponent analysis reveals that all currencies have long memory tendencies for both rolling windows (2015-2019; 2019-2023), thus contradicting weak-form efficiency. However, the Chinese Yuan, Russian Rubble, and South African Rand exhibit deteriorating levels of efficiency as the Hurst exponent increases between the two periods. This finding is complemented by the sentimental analysis, which shows that, on average, the second rolling window has an increased positive sentiment level toward the emergence of a new reserve currency. Integrating the trajectory of returns on the Yuan against the sentiment score trend yields interesting results, as it shows a trail thus underpinning Yuanization. Employing the FRUH and CIP analyses as robustness checks yields similar results for long decay in arbitrage opportunities, as the coefficients and deviations significantly depart from the 1:1 threshold.

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Section: Fruh Empirical Resultssupporting

confidence: 93%

Dedollarization and market efficiency: A trade arbitrage perspective in the BRICS and WAEMU nations

Chunga,

Ping

2024

Preprint

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“…Hence, Uncovered Interest Parity (UIP) might be another theory that provides a possible explanation. While examining the efficiency of the Korean foreign exchange market, Kang (2019) pointed out risk premia in the international financial market and of central bank interventions as the main drivers of foreign exchange market inefficiencies. Levich et al (2019) suggested that after the financial and economic crises from 2008 foreign exchange market became more efficient and inefficiency was related to emerging market currencies.…”

Section: Implications and Discussionmentioning

confidence: 99%

Market Efficiency of Euro Exchange Rates and Trading Strategies

Bošnjak

Novák

Vlajčić

2021

Naše Gospodarstvo/Our Economy

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This paper tests the hypothesis on market efficiency for returns on the euro against fifteen currencies while assuming predictability of returns, dependent on the sign and magnitude of endogenous shocks. Considering the properties of exchange rate returns, the quantile autoregression approach was selected in empirical analysis. Based on the research data sample, consisting of daily exchange rates between January first, 1999, and April thirty, 2020, the paper suggests profitable trading strategies depending on a currency pair. In the case of six out of fifteen currency pairs, exchange rate returns were found non-predictable or almost non-predictable. In the case of nine considered currency pairs, there was a significant linkage between current and past exchange rate returns, found as dependent on the sign and magnitude of endogenous shocks in exchange rate returns. Finally, the paper considered possible factors of inefficiency and suggested further research of the topic.

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Determination of the Efficient Markets Hypothesis in the Turkish Exchange Market in Terms of Behavioral Finance

Başarir¹,

Serel

2021

Yönetim Ve Ekonomi Araştırmaları Dergisi

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Etkin piyasalar hipotezine göre rasyonel bireyler ulaşılabildikleri tüm bilgileri kullanarak bilginin hepsinin fiyatlara yansımasını sağlamakta ve piyasada sistematik hata söz konusu olmamaktadır. Bu hipotezin geçerli olması bireylerin rasyonel davranması ve piyasada arbitraj imkanının bulunması varsayımlarını içermektedir. Ancak yıllar boyunca yapılan gözlem ve uygulama çalışmalarında, bu varsayımların aksine sonuçların meydana geldiği gözlemlenmiştir. Bu çalışmada TL'nin Euro ve dolara karşı günlük spot ve forward döviz kurları kullanılarak Türkiye'de döviz piyasasının zayıf formda ve yarı güçlü formda etkin olup olmadığı 2010/01-2020/09 dönemi için, Engle Granger Eşbütünleşme testi ve yapısal kırılamyı dikkate alan Gregory Hansen yöntemleri ile test edilmiştir. Çalışma sonucunda Türkiye için ele alınan dönem içerisinde yapısal kırılmaları da dikkate alan testler sonucunda Döviz piyasalarının zayıf formda etkin olmasına rağmen yarı güçlü formda etkin olmadığı tespit edilmiştir.

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Currency Market Efficiency Revisited: Evidence from Korea

Abstract: Keywords: foreign exchange market efficiency; forward rate unbiased hypothesis; covered interest rate parity; central banks; central banks’ policies

Cited by 3 publications

References 31 publications

Dedollarization and market efficiency: A trade arbitrage perspective in the BRICS and WAEMU nations

Dedollarization and market efficiency: A trade arbitrage perspective in the BRICS and WAEMU nations

Market Efficiency of Euro Exchange Rates and Trading Strategies

Determination of the Efficient Markets Hypothesis in the Turkish Exchange Market in Terms of Behavioral Finance

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