Tests of exchange market efficiency: fragile evidence from cointegration tests

Sephton, Peter S.; Larsen, Hans Kryger

doi:10.1016/0261-5606(91)90007-7

Cited by 155 publications

(55 citation statements)

References 16 publications

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“…The Hungarian market appeared to be highly affected by that crisis. This finding is consistent with Schotman and Zalewska (2005) who found that the Hungarian market was the most, and the Czech market the least, sensitive to the Asian and Russian crises, an outcome that may be explained by the fact that among the three emerging markets discussed in that study, the Hungarian market had the highest foreign share ownership level and the Czech market the lowest.…”

Section: Introductionsupporting

confidence: 94%

German, US and Central and Eastern European Stock Market Integration

Syllignakis

Κουρέτας

2009

Open Econ Rev

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Section: Introductionsupporting

confidence: 94%

German, US and Central and Eastern European Stock Market Integration

Syllignakis

Κουρέτας

2009

Open Econ Rev

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“…More specifically, MacDonald and Taylor (1989) find cointegration for the French franc/USD and Deutsche mark/USD, while Baillie and Bollerslev (1989) assert the cointegration of their sample for seven currencies by using daily nominal spot and forward rates from March 1980 to January 1985 for Johansen's (1988) maximum likelihood technique. Sephton and Larsen (1991) suggest that the level of market efficiency is heavily sensitive to the sample period chosen; this is later confirmed by Barkoulas and Baum (1997). Lajauine and Naka (1992), employing Johansen's (1991) methodology, investigate four currencies traded in Tokyo's foreign exchange market and find evidence against Baillie and Bollerslev (1989).…”

Section: Prior Literature On the Efficiency Of The Foreign Exchange Msupporting

confidence: 55%

The US Financial Crisis and the Behavior of the Foreign Exchange Market

Padungsaksawasdi¹

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“…Baillie and Bollerslev (1989) find evidence of one cointegrating vector in a system of seven daily exchange rates, while Hakkio and Rush (1989) have shown that monthly spot exchange rates are not cointegrated. Sephton and Larsen (1991) demonstrated the sensitivity of these findings to sample period, with a 'rolling' test approach indicating periods during which cointegrating might be suggested by the data. The final example of non-linear cointegration will employ the Baillie and Bollerslev (1989) …”

Section: Spot Exchange Ratesmentioning

confidence: 92%

Cointegration tests on MARS

Sephton

1994

Comput Econ

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Abstract. Multivariate adaptive regression spline (MARS) models due to Friedman (1991) I. In~oducfionEngle and Granger (1987) provided a set of residual based tests of whether two or more series that appear to be random walks were in fact tied together by a long-run linear relationship. Since this seminal work there has been an explosion of empirical research on both testing for cointegration and in modelling cointegrated series, a Relatively rudimentary residual based tests have been extended and replaced, in great measure, by those based on systems methods of estimation.The purpose of this paper is to provide yet another extension to the Engle and Granger test to examine the extent to which non-linear cointegrating relationships can be identified and examined. Attempts to model non-linear cointegrating relationships have already begun to appear in the literature. Meese and Rose (1991) used the relatively simple ACE (alternating conditional expectations) algorithm of Breiman and Friedman (1985) to compare models of exchange rate determination, while Chinn (1991) used ACE to estimate a monetary model of the exchange rate. The ACE algorithm searches for data transformations that maximize the R -~ between the transformed series. Granger and Hallman (1991) and Hallman (1991) employed ACE in an attempt to identify non-linear cointegration, and suggested that ACE may be capable of capturing time-varying cointegration. Granger and Hallman (1991) provided some experimental evidence on the behaviour of the Dickey-Fuller and Augmented Dickey-Fuller cointegration tests based on ACE residuals, but their Monte Carlo simulations used only 100 replications on 100 data points, after which they applied ACE to a dataset of over 400 observations.The primary aim of this paper is to use the more sophisticated MARS algorithm to examine non-linear cointegration, since there may be stable long-run equilibrium relationships that escape additive analysis. MARS allows for both additive

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Tests of exchange market efficiency: fragile evidence from cointegration tests

Cited by 155 publications

References 16 publications

German, US and Central and Eastern European Stock Market Integration

German, US and Central and Eastern European Stock Market Integration

The US Financial Crisis and the Behavior of the Foreign Exchange Market

Cointegration tests on MARS

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