Nonparametric Testing of the High-Frequency Efficiency of the 1997 Asian Foreign Exchange Markets

Posted: 4 Jun 2008

See all articles by Cornelis A. Los

Cornelis A. Los

University of California at Irvine - The Paul Merage School of Business; EMEPS Associates

Multiple version iconThere are 2 versions of this paper

Date Written: 1999

Abstract

Sherry's (1992) nonparametric pattern tests for neural information processing are used to ascertain if the Asian FX rates followed random walks. The stationarity and serial independence of the price changes are tested on minute-by-minute data for nine Asian currencies from January 1, 1997 to December 30, 1997. The efficiency of these FX markets before and after the Asian currency "regime discontinuity" are compared. The Thai baht, Malaysian ringgit, Indonesian rupiah and Singapore dollar exhibited non-stationary behavior during the entire year, and gave evidence of a trading regime break, while the Phillipines' peso, Taiwan dollar, Yen and Deutschmark remained stationary, with the US dollar as numeraire. However, each half-year regime showed stationarity, indicating stable and nonchaotic trading regimes for all currencies, despite their high volatilities, except for the Malaysian ringgit, which exhibited non-stationarity in the second half of 1997. The Thai baht traded nonstationarily in the first half of 1997, but stationarily in the second half, while the Taiwan dollar reversed that trading pattern. Based on Sherry's four tests for serial independenc, none of the currencies exhibited complete independence. Thus no Asian currency market - including the Yen - exhibited complete efficiency in 1997, in particular when compared with the highly efficient Deutschmark. Remarkably, the Phillippines' peso remained as efficient as the Japanese Yen throughout 1997.

Keywords: Market efficiency, Non-parametric testing, High-frequency FX data, Asia

JEL Classification: C14, F31, G14

Suggested Citation

Los, Cornelis A., Nonparametric Testing of the High-Frequency Efficiency of the 1997 Asian Foreign Exchange Markets (1999). Journal of Multinational Financial Management, Vol. 9, No. 3-4, pp. 265-289, 1999, Available at SSRN: https://ssrn.com/abstract=1140408

Cornelis A. Los (Contact Author)

University of California at Irvine - The Paul Merage School of Business ( email )

SB1
Irvine, CA 92697-3125
United States

HOME PAGE: http://merage.uci.edu/research-faculty/faculty-directory/Cornelis-Los.html

EMEPS Associates ( email )

Escondido, CA 92029
United States
760-294-0255 (Phone)
858-635-4783 (Fax)

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
470
PlumX Metrics