Joint Variance-Ratio Tests of the Martingale Hypothesis for Exchange Rates
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 float...
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| Veröffentlicht in: | Journal of business & economic statistics 1997-01, Vol.15 (1), p.51-59 |
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| creator | Fong, Wai Mun Koh, Seng Kee Ouliaris, Sam |
| description | 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. |
| doi_str_mv | 10.1080/07350015.1997.10524686 |
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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. 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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.</description><subject>Approximation</subject><subject>Comparative studies</subject><subject>Descriptive statistics</subject><subject>Economic models</subject><subject>Economic statistics</subject><subject>Economic theory</subject><subject>Exchange rates</subject><subject>Foreign exchange rates</subject><subject>Hypotheses</subject><subject>Martingale</subject><subject>Martingales</subject><subject>Multiple-comparisons test</subject><subject>Null hypothesis</subject><subject>Overlapping observations</subject><subject>Ratios</subject><subject>Sample size</subject><subject>Sample variance</subject><subject>Statistical variance</subject><subject>Statistics</subject><subject>Time 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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.</abstract><cop>Washington, D.C</cop><pub>Taylor & Francis Group</pub><doi>10.1080/07350015.1997.10524686</doi><tpages>9</tpages><oa>free_for_read</oa></addata></record> |
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| subjects | Approximation Comparative studies Descriptive statistics Economic models Economic statistics Economic theory Exchange rates Foreign exchange rates Hypotheses Martingale Martingales Multiple-comparisons test Null hypothesis Overlapping observations Ratios Sample size Sample variance Statistical variance Statistics Time series Variance |
| title | Joint Variance-Ratio Tests of the Martingale Hypothesis for Exchange Rates |
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