Foreign exchange market efficiency and profitability of trading rules: Evidence from a developing country

Katusiime, Lorna; Shamsuddin, Abul; Agbola, Frank W.

doi:10.1016/j.iref.2014.10.003

Cited by 43 publications

(33 citation statements)

References 43 publications

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“…Investigation on EMH in exchange rate has been a vital question since the pioneering work of Meese and Rogoff (1983). Since then, numerous studies have examined the EMH for different developed and developing FX markets (Azad, 2009;Belaire-Franch & Opong, 2005;Katusiime, Shamsuddin, & Agbola, 2015;Salisu & Ayinde, 2016;Yilmaz, 2003). In general, empirical findings from literature show mixed evidence of predictability and unpredictability.…”

Section: Literature Reviewmentioning

confidence: 99%

Evolving Efficiency of Exchange Rate Movement: An Evidence from Indian Foreign Exchange Market

Khuntia

Pattanayak

2019

Global Business Review

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This study empirically verifies the evolving and time-varying efficiency of Indian foreign exchange market using the framework of adaptive market hypothesis (AMH). Whether market efficiency is time varying or static, and if time varying, identification of possible events causing such time-varying efficiency are the two major agenda of this study. We employ a set of recent methods which are robust and possess stronger power properties. Moreover, we follow a fixed-length rolling window approach to explore time-varying nature of market efficiency and to avoid data-snooping bias. Our overall findings suggest that market efficiency is not an all-or-nothing condition; it varies over time. We also find that episodes of efficiency coincide with emergence of major events and market microstructure issues. Particularly, changes in exchange rate regime, financial turbulence, major central bank interventions and trade volume are the prominent causes for time-varying efficiency in INR–USD exchange rate. The evidence of swing between efficiency and inefficiency can prompt currency traders to exploit arbitrage opportunities that emerge with different market conditions.

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Section: Literature Reviewmentioning

confidence: 99%

Evolving Efficiency of Exchange Rate Movement: An Evidence from Indian Foreign Exchange Market

Khuntia

Pattanayak

2019

Global Business Review

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“…Concerning the COVID-19 impact on forex markets, a critical aspect that needs to be addressed is the efficiency of the forex market. The extant research shows that forex market efficiency is difficult to detect ( Katusiime et al., 2015 ), and the market efficiency of exchange rates changes over time, in particular, during crisis-like situations ( Levich et al., 2019 ). Inefficiency in the forex market generates different puzzling anomalies and delayed overshooting ( Li and Miller, 2015 ).…”

Section: Introductionmentioning

confidence: 99%

On the efficiency of foreign exchange markets in times of the COVID-19 pandemic

Aslam

Aziz

Nguyen

et al. 2020

Technological Forecasting and Social Change

180

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Highlights The COVID-19 pandemic has jolted foreign exchange markets within a short time. We measure forex efficiency with multifractal detrended fluctuation analysis. We find varying degrees of forex market efficiency before and during COVID-19. Investors can structure their investment strategies to exploit market inefficiency. Our findings may help policymakers find responses to such forex market upheavals.

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“…While investigating the impact COVID-19 on forex markets, a critical aspect that needs to be addressed is the efficiency of the forex market. The extant research shows that the efficiency in the forex market remains difficult to detect (Katusiime et al, 2015), and the market efficiency of exchange rates changes over time, in particular, during the crisis-like situations (Levich et al, 2019). The inefficiency in the forex market generates different puzzling anomalies and delayed overshooting (Li and Miller, 2015).…”

Section: Introductionmentioning

confidence: 99%

On the Efficiency of Foreign Exchange Markets in Times of the COVID-19 Pandemic

et al. 2020

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We employ multifractal detrended fluctuation analysis (MF-DFA) to provide the first look at the efficiency of forex markets during the initial period of ongoing COVID-19 pandemic, which has disrupted the financial markets globally. We use high frequency (5-min interval) data of six major currencies traded in the forex market for the period from 01 October 2019 to 31 March 2020. Prior to the application of MF-DFA, we examine the inner dynamics of multifractality using seasonaltrend decompositions using loess (STL) method. Overall, the results confirm the presence of multifractality in forex markets, which demonstrates, in particular: (i) a decline in the efficiency of forex markets during the period of COVID-19 outbreak, and (ii) the heterogeneity in the effects on the strength of multifractality of exchange rate returns under investigation. The largest effect is observed in the case of AUD as it shows the highest (lowest) efficiency before (during) COVID-19 assessed in terms of low (high) multifractality. During COVID-19 period, CAD and CHF exhibit the highest efficiency. Our findings may help policymakers in shaping a comprehensive response to improve the forex market efficiency during such a black swan event.

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Foreign exchange market efficiency and profitability of trading rules: Evidence from a developing country

Cited by 43 publications

References 43 publications

Evolving Efficiency of Exchange Rate Movement: An Evidence from Indian Foreign Exchange Market

Evolving Efficiency of Exchange Rate Movement: An Evidence from Indian Foreign Exchange Market

On the efficiency of foreign exchange markets in times of the COVID-19 pandemic

On the Efficiency of Foreign Exchange Markets in Times of the COVID-19 Pandemic

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