Testing the Martingale Hypothesis in Deutsche Mark Futures with Models Specifying the Form of Heteroskedasticity

Journal of Applied Econometrics, Vol. 3, No. 3, p. 187, 1988

17 Pages Posted: 29 Feb 2012

See all articles by Thomas H. McCurdy

Thomas H. McCurdy

University of Toronto - Rotman School of Management

Ieuan G. Morgan

Queen's University - Smith School of Business

Date Written: 1986

Abstract

We examine the form of heteroskedasticity in Deutsche Mark futures price data and compare different specifications of the particular way that the variance is changing over time. The martingale hypothesis is tested with daily and weekly rates of change of futures prices for the Deutsche Mark and some evidence is found against this hypothesis in analyses of daily data from 1981 to 1985. This rejection of the martingale hypothesis may be attributed to trading day effects in foreign currency prices and the resulting day-of-the-week patterns in futures prices. When the martingale hypothesis is tested with weekly data the null hypothesis is retained.

Keywords: heteroskedasticity, foreign currency futures, trading-day effects, day-of-the-week patterns, martingale

JEL Classification: F31, G13, C32

Suggested Citation

McCurdy, Thomas H. and Morgan, Ieuan G., Testing the Martingale Hypothesis in Deutsche Mark Futures with Models Specifying the Form of Heteroskedasticity (1986). Journal of Applied Econometrics, Vol. 3, No. 3, p. 187, 1988, Available at SSRN: https://ssrn.com/abstract=2013367

Thomas H. McCurdy (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416-978-3425 (Phone)
416-971-3048 (Fax)

HOME PAGE: http://www-2.rotman.utoronto.ca/~tmccurdy

Ieuan G. Morgan

Queen's University - Smith School of Business ( email )

Smith School of Business - Queen's University
143 Union Street
Kingston, Ontario K7L 3N6
Canada

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