Investment intensity of currencies and the random walk hypothesis: Cross-currency evidence

Chuluun, Tuugi; Eun, Cheol S.; Kılıç, Rehim

doi:10.1016/j.jbankfin.2010.08.013

Cited by 20 publications

(10 citation statements)

References 32 publications

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“…Indeed, since Fama's (1965Fama's ( , 1970 simple, but powerful testable specification of relative market efficiencies depending on a taxonomy of information set available to market participants (i.e., weak-form, semi strong-form and strong-form), a large amount of literature has emerged on the weak-form efficiency of financial assets, primarily relating to whether stock prices are randomly generated (Ayadi & Pyun, 1994;Belaire-Franch & Opong, 2005a;Campbell, Lo, & MacKinlay, 1997;Lo & MacKinlay, 1988Ntim, 2012;Ntim, Opong, & Danbolt, 2007;Ntim, Opong, Danbolt, & Dewotor, 2011;Smith, Jefferis, & Ryoo, 2002;Urrutia, 1995), but also other securities, such as exchange rates, bonds and precious metals (Belaire-Franch & Opong, 2005bChuluun, Eun, & Kilic, 2011;Hsieh, 1991;Liu & He, 1991).…”

Section: Prior Empirical Literature On the Efficiency Of Gold Marketsmentioning

confidence: 99%

On the efficiency of the global gold markets

Ntim

English

Nwachukwu

et al. 2015

International Review of Financial Analysis

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a b s t r a c t a r t i c l e i n f o Available online xxxx JEL classification: G1 Financial markets G14 Information and market efficiency G15 International financial markets G17 Financial forecasting Keywords: Global gold markets Macroeconomic variables Random walks and martingales Weak-form efficiency Variance-ratios Ranks and signsThis paper examines the weak-form efficiency of the global gold markets with specific focus on the random walks (RWS) and martingale difference sequence (MDS) hypotheses, and consequently, investigates the extent to which predictability or non-predictability of global daily spot gold price return series behaviour can be explained by volatilities in macroeconomic fundamentals. We apply traditional parametric variance-ratio tests and their recent non-parametric modifications based on ranks and signs to one of the largest datasets on world gold markets to-date, consisting of daily spot price series of 28 emerging and developed gold markets from January 1968 to August 2014. First, our results show that gold markets in Egypt, Indonesia, Mexico, Nepal, Pakistan, Russia, Saudi Arabia, UAE and Vietnam are not weak-form efficient neither from the perspective of the strict RWS nor in the relaxed MDS sense. By contrast, RWS and MDS hypotheses cannot be rejected for gold markets in Hong Kong, Japan, Switzerland, UK and US at the conventional rejection levels. Results for gold markets in Australia, Thailand and Turkey are, however, mixed. Second, our findings show that greater changes in economic fundamentals are associated with lower levels of rejecting the RWS and MDS hypotheses. Third, our evidence shows that the probability of rejecting the weak-form efficiency is higher in emerging gold markets than developed ones. Fourth, our results show that the RWS hypothesis is rejected more frequently than its MDS alternative, and thereby justifying our decision to conduct an explicit test of the RWS and MDS hypotheses. Our results are robust to estimating subsamples, overlapping rolling windows and endogeneity corrected models, as well as controlling for a number of country-specific institutional and trading factors. Our findings have crucial implications for global portfolio managers, investors, poly-makers and regulatory authorities.

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Section: Prior Empirical Literature On the Efficiency Of Gold Marketsmentioning

confidence: 99%

On the efficiency of the global gold markets

Ntim

English

Nwachukwu

et al. 2015

International Review of Financial Analysis

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“…Finally, Yilmaz (2003), Chiang et al (2010), Belaire-Franch and Contreras (2011) and Chuluun et al (2011) are the only studies that evaluate the MDH from time-varying measures using moving sub- sample windows. 6 More precisely, Yilmaz (2003) use the VR tests of Chow and Denning (1993) and Richardson and Smith (1991); Chiang et al (2010) use those of Lo and MacKinlay (1988), Wright (2000) and Chow and Denning (1993); while Chuluun et al (2011) use those of Chow and Denning (1993), Lo and MacKinlay (1988), Wright (2000), along with the spectral test of Kuan and Lee (2004).…”

Section: Wild Bootstrap P−values Of the Avr Statistics − Switzerlandmentioning

confidence: 99%

“…In this study, we use the approach of moving sub-sample window to capture the dynamically changing return predictability under the AMH. To the best of our knowledge, Yilmaz (2003), Chiang et al (2010), Contreras (2011), andChuluun et al (2011) are the only studies that evaluate the MDH using time-varying measures in foreign exchange rates, but without an explicit link with the AMH.…”

Section: Introductionmentioning

confidence: 99%

Exchange-rate return predictability and the adaptive markets hypothesis: Evidence from major foreign exchange rates

Charles

Darné

Kim

2012

Journal of International Money and Finance

104

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“…Therefore, market efficiency may not follow a secular trend toward greater efficiency as anticipated by proponents of the EMH, but instead can vary in a cyclical fashion being "highly context dependent and dynamic" (Lo, 2004). Though a number of recent studies proceed to explain time variation in the degree of return predictability (see Chuluun et al, 2011;Gu and Finnerty, 2002;Lagoarde-Segot, 2009), none of these previous studies explore the role of changing market conditions.…”

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confidence: 99%