THE EFFICIENCY OF FOREIGN EXCHANGE FUTURES MARKETS: EVIDENCE FROM COINTEGRATION TESTS
This study investigates the efficiency of futures markets for foreign currencies using the technique of cointegrationforfiveactively-tradedcurrencies. Threetestsareused:(1)cointegrationtestsonthefuturesandspot prices ofthefive currencies; (2) cointegration tests ofthefutures and spot prices on each...
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| Format: | Article |
| Language: | English |
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People & Global Business Association (P&GBA)
1998-03-01
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| Series: | Global Business and Finance Review |
| Subjects: | |
| Online Access: | http://www.gbfrjournal.org/pds/journal/thesis/20150625122502-DOK6Z.pdf |
| Summary: | This study investigates the efficiency of futures markets for foreign currencies using the technique of cointegrationforfiveactively-tradedcurrencies. Threetestsareused:(1)cointegrationtestsonthefuturesandspot prices ofthefive currencies; (2) cointegration tests ofthefutures and spot prices on each ofthefive currencies; and (3) estimation and test ofan error-correction modelfor each ofthefive currencyfutures. Resultsfrom tests one and two indicate that spot andfutures marketsfor thefive currencies are not cointegrated, thus, supporting the efficient markethypothesis. Forthelong-termtest,thereisaunitarycointegrationfactorforeachcurrencytested. However, results based on the error-correction model and F-tests on restricted parameters, produce inconsistent results, sug- gesting that the markets are not efficient. |
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| ISSN: | 1088-6931 2384-1648 |