Efficiency in BRICS Currency Markets Using Long-Spans of Data: Evidence from Model-Free Tests of Directional Predictability

Gupta, Rangan; Plakandaras, Vasilios

doi:10.22610/jebs.v11i1(j).2756

Cited by 4 publications

(2 citation statements)

References 15 publications

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“…Relatively, the IRFs are more volatile at longer horizons. One possible explanation is that since China's FX market may not be fully efficient (Gupta & Plakandaras, 2019), the market may need time to recognize the shock, waiting to see the impact it will cause and responding accordingly afterward. Consequentially, the IRFs at the horizons of 0-month and 1-month are more stable and less precise, indicating market inefficiency.…”

Section: Baseline Modelmentioning

confidence: 99%

Economic Uncertainty and Exchange Market Pressure: Evidence From China

Lin

2022

SAGE Open

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This paper evaluates the impact of local and external economic uncertainty shocks on China’s exchange market pressure from a time-varying perspective. We first construct a simple behavioral model to provide some economic background for our empirical analysis. The model identifies two channels, namely market sentiment and market demand, through which economic uncertainty has a time-varying impact on exchange market pressure. Notably, we calculate a new exchange market pressure index for China by considering China’s practice. Using the economic policy uncertainty index as a proxy for economic uncertainty and our new estimates of China’s exchange market pressure, we employ a novel TVP-VAR model controlling for over-parameterization to a monthly dataset from January 2001 to October 2020 to analyze the impact of China’s and U.S. economic policy uncertainties on China’s exchange market pressure. Our empirical findings robustly show that an upsurge in U.S. EPU is followed by appreciation pressure of the RMB against the dollar, while a hike in China’s EPU triggers devaluation pressure on the RMB. In addition, the impact of economic policy uncertainty has considerable time variation in magnitude, especially after mid-2011, showing a trade-off mechanism between the effects of domestic and foreign economic uncertainties on China’s exchange market pressure. Moreover, we attribute the time-varying features to the changes in China’s dependence on the U.S. and in the exchange rate flexibility. Finally, China should further improve the exchange rate flexibility, reduce its dependence on the U.S. and develop a more diversified currency basket in the exchange rate formation mechanism. JEL: F31 C50 E70

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Section: Baseline Modelmentioning

confidence: 99%

Economic Uncertainty and Exchange Market Pressure: Evidence From China

Lin

2022

SAGE Open

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“…SeePanagiotidis (2005),Aye et al, (2017Aye et al, ( , 2018, andGupta and Plakandaras (2019) for detailed literature reviews on efficiency of various financial markets.2 The AMH suggests that the degree of return predictability varies as market conditions change, and the level of market efficiency varies over time.…”

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confidence: 99%

Testing the white noise hypothesis in high-frequency housing returns of the United States

et al. 2020

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Utilizing a daily dataset of aggregate housing market returns of the United States, we test whether housing market returns are white noise using the blockwise wild bootstrap in a rolling-window framework. We investigate the dynamic evolution of housing market efficiency and find that the white noise hypothesis is accepted in most windows associated with non-crisis periods. However, for some periods before the burst of the housing market bubbles, and during the subprime mortgage crisis, European sovereign debt crisis and the Brexit, the white noise hypothesis is rejected, indicating that the housing market is inefficient in periods of turbulence. Our results have important implications for economic agents.

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Calendar anomalies’ adaptiveness in exchange rates: evidence from the concordance coefficient and AR-GARCH tests

Villarreal-Samaniego

2024

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PurposeThis research aims to examine the time-varying behavior of the Weekend, Turn-of-the-Month, January, and Halloween effects in eight foreign exchange rates against the U.S. dollar from the Adaptive Market Hypothesis (AMH) perspective. It also explores whether these anomalies can generate excess returns compared to a buy-and-hold strategy.Design/methodology/approachUsing daily return data from January 2004 to December 2023 in a rolling-window framework, the study employs the Concordance Coefficient test and AR-GARCH models to assess the time-varying behavior of four calendar anomalies. It also assesses the statistical significance of the trading strategies implied by these anomalies using t-tests and applies F-tests for subperiod analysis.FindingsThe results reveal a generalized time-varying presence of calendar anomalies in emerging currencies and, to a lesser extent, developed currencies. However, the trading strategies implied by these anomalies generally did not show statistical significance, except for the Turn-of-the-Month effect, which exhibited statistically significant unprofitability.Originality/valueThe study pioneers an analysis of five calendar anomalies across various currencies from the standpoint of the AMH and proposes case-specific explanations for their occurrence. It also examines the potential for the anomalies’ implied trading strategies to generate excess returns compared to a straightforward buy-and-hold strategy. Additionally, the study introduces the recently developed Concordance Coefficient test as a valuable alternative to other non-parametric methods.

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Efficiency in BRICS Currency Markets Using Long-Spans of Data: Evidence from Model-Free Tests of Directional Predictability

Cited by 4 publications

References 15 publications

Economic Uncertainty and Exchange Market Pressure: Evidence From China

Economic Uncertainty and Exchange Market Pressure: Evidence From China

Testing the white noise hypothesis in high-frequency housing returns of the United States

Calendar anomalies’ adaptiveness in exchange rates: evidence from the concordance coefficient and AR-GARCH tests

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