Foreign Exchange Market Efficiency Under Recent Crises: Asia-Pacific Focus

26 Pages Posted: 22 Aug 2011 Last revised: 8 Aug 2012

See all articles by Rubi Ahmad

Rubi Ahmad

University of Malaya (UM)

S. Ghon Rhee

University of Hawaii - Shidler College of Business; University of Hawaii - Department of Financial Economics and Institutions

Yuen Meng Wong

University of Malaya (UM) - Faculty of Business & Accountancy

Date Written: August 21, 2011

Abstract

The Asia-Pacific region’s currency markets are generally efficient within-country when tested using the Johansen (1991, 1995) cointegration technique whereas market efficiency fails to hold when tested using Fama’s (1984) conventional regression. Using the Pilbeam and Olmo (2011) model, we reconcile these conflicting findings. The Pilbeam and Olmo (2011) model confirms within-country market efficiency. It further confirms that free-float currency markets are more resilient than managed-float currency markets among 12 Asia-Pacific economies. From the across-country perspective, the foreign exchange markets are mostly efficient and the results show that the 1997–1998 Asian financial crisis was a more disturbing event than the 2008–2009 global financial crisis in the region.

Keywords: Foreign exchange market efficiency, Forward unbiasedness hypothesis, Cointegration, Asia-Pacific Currencies

JEL Classification: G14, G15, F31

Suggested Citation

Ahmad, Rubi and Rhee, S. Ghon and Wong, Yuen Meng, Foreign Exchange Market Efficiency Under Recent Crises: Asia-Pacific Focus (August 21, 2011). Journal of International Money and Finance, Vol. 31, No. 6, 2012. Available at SSRN: https://ssrn.com/abstract=1913995 or http://dx.doi.org/10.2139/ssrn.1913995

Rubi Ahmad

University of Malaya (UM) ( email )

Kuala Lumpur, Wilayah Persekutuan 50603
University of Malaya (UM)
Kuala Lumpur, Wilayah Persekutuan 50603
Malaysia
+603 79673961 (Phone)

S. Ghon Rhee

University of Hawaii - Shidler College of Business ( email )

2404 Maile Way
C-304, FEI/CBA
Honolulu, HI 96822
United States

University of Hawaii - Department of Financial Economics and Institutions ( email )

United States

Yuen Meng Wong (Contact Author)

University of Malaya (UM) - Faculty of Business & Accountancy ( email )

Jalan Lembah Pantai
Kuala Lumpur, Wilayah Persekutuan 50603
Malaysia

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