Foreign Exchange Markets Efficiency Under Recent Crises: Evidence from the European Markets

European Financial Management Association 2013 Annual Meeting, June 26-29, 2013, Reading, UK

25 Pages Posted: 24 Jun 2013

See all articles by Yuen Meng Wong

Yuen Meng Wong

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

Rubi Ahmad

University of Malaya (UM)

Date Written: June 12, 2013

Abstract

This study investigates the European foreign exchange markets efficiency from both the within- and across-country perspectives and subsequently compared them across several recent crises. The European foreign exchange markets are generally efficient over the whole sample period. From the subsample periods analysis, September 11, 2001 event is shown to be the most disturbing event among recent crises. Surprisingly, there is little evidence of disturbance to foreign markets efficiency during the two most recent major crises namely the global financial crisis of 2008/09 and the current European Sovereign Debt Crisis (ESDC). The forward bias puzzle remains a more prominent phenomenon among the advanced countries' currencies than their developing counterparts. There is also evidence showing the convergence in the efficiency condition between the European advanced and developing countries‟ currencies in the later subsample periods. There are three key contributions; one, we have updated the literature until the recent ESDC; two, our results provide comfort to policymakers that the European foreign exchange markets efficiency is least affected by the recent crises; and three, our conclusions support the notion of market efficiency in the long run.

Keywords: Markets efficiency, European foreign exchange rates, Forward bias puzzle, Crises

JEL Classification: E44, F31, G14

Suggested Citation

Wong, Yuen Meng and Ahmad, Rubi, Foreign Exchange Markets Efficiency Under Recent Crises: Evidence from the European Markets (June 12, 2013). European Financial Management Association 2013 Annual Meeting, June 26-29, 2013, Reading, UK, Available at SSRN: https://ssrn.com/abstract=2283809 or http://dx.doi.org/10.2139/ssrn.2283809

Yuen Meng Wong (Contact Author)

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

Jalan Lembah Pantai
Kuala Lumpur, Wilayah Persekutuan 50603
Malaysia

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)

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