2011-09: Are Euro exchange rates markets efficient? New evidence from a large panel (Working paper)

Abstract

This paper examines the market efficiency hypothesis in Euro FX markets by testing for autocorrelation in daily FX returns of 82 countries over the period of 1999-2010. We use three newly developed tests that are robust to conditional heteroskedasticity of unknown forms and that do not choose a lag parameter arbitrarily. They are Escanciano & Lobato (2009)'s automatic Box-Pierce Qp test, Nankervis & Savin (2010)'s generalized Andrews-Ploberger test and Deo (2000)'s robust Durlauf test. We find no significant autocorrelation in the FX returns of around 58 to 62 countries, suggesting that majority of the Euro FX markets are efficient.