ARCH effects and cointegration: Is the foreign exchange market efficient?

Journal of Banking and Finance

Volumn 20, Issue 4, 1996, Pages 687-697

  Alexakis, Panayotis ^a   Apergis, Nicholas ^b  

^a UNIVERSITY OF THE AEGEAN   (Greece)

^b UNIVERSITY OF MACEDONIA   (Greece)

Author keywords

ARCH effects; Cointegration; Efficient markets; Forward exchange rates

Indexed keywords

EID: 0030137339     PISSN: 03784266     EISSN: None     Source Type: Journal    
DOI: 10.1016/0378-4266(95)00027-5     Document Type: Article

References (34)

1. Bailey, R.W., R.T. Baillie and P.C. McMahon, 1984, Interpreting econometric evidence on efficiency in the foreign exchange market, Oxford Economic Papers 36, 67-85.
2. Baillie, R.T., 1989, Econometric tests of rationality and market efficiency, Econometric Reviews 8, 151-186.
3. Baillie, R.T. and T. Bollerslev, 1989, The message in daily exchange rates: a conditional variance tale, Journal of Business and Economic Statistics 7, 297-305.
4. Baillie, R.T., R.E. Lippens and P.C. McMahon, 1983, Testing rational expectations and efficiency in the foreign exchange market, Econometrica 51, 553-563.
5. Bilson, J.F.O., 1981, The speculative efficiency hypothesis, Journal of Business 54, 435-451.
6. Bollerslev, T., 1986, Generalised autoregressive conditional heteroskedasticity, Journal of Econometrics 31, 3.7, 328.
7. Bollerslev, T., R. Chou and K. Kroner, 1992, ARCH modelling in finance: a review of the theory and empirical evidence, Journal of Econometrics 52, 5-60.
8. Cornell, B., 1977, Spot rates, forward rates and exchange market efficiency, Journal of Financial Economics 5, 56-65.
9. Cumby, R. and M. Obstfeld, 1984, International interest rate and price level linkages under flexible exchange rates: a review of recent evidence, in: J. Bilson, R. Merston, eds., Exchange rate theory and practice (Chicago), 121-151.
10. Dickey, D.A. and W.F. Fuller, 1979, Distribution of the estimators for autoregressive time series with a unit root, Journal of the American Statistical Association 74, 427-431.
11. Diebold, F.X., 1988, Empirical modeling of exchange rate dynamics (Springer Verlag, New York).
12. Diebold, F.X. and P. Pauly, 1988, Endogenous risk in a portfolio balance rational expectations model of the DM/$US rate, European Economic Review 32, 27-53.
13. Domowitz, I. and C.S. Hakkio, 1985, Conditional variance and the risk premium in the foreign exchange market, Journal of International Economics 19, 47-66.
14. Engle, R., 1982, Autoregressive conditional heteroskedasticity with estimates of the variance of U.K. inflation, Econometrica 50, 987-1008.
15. Engle, R. and T. Bollerslev, 1986, Modelling the persistence of conditional variances, Econometric Review 5, 1-50.
16. Engle, R. and C.M.J. Granger, 1987, Cointegration and error-correction: representation, estimation and testing, Econometrica 55, 251-276.
17. Engle, R., D. Lilien and R. Robins, 1987, Estimating time varying risk premia in the term structure: the ARCH-M model, Econometrica 55, 391-407.
18. Frankel, J.A., 1980, Exchange rates, prices and money, Lessons from the 1920's, American Economic Review, Papers and Proceeding 70, 235-242.
19. Frankel, J.A., 1981, Flexible exchange rates, prices and the role of 'News': Lessons from the 1970's, Journal of Political Economy 89, 665-705.
20. Frenkel, J., 1980, Tests of rational expectations in the forward exchange market, Southern Economic Journal 46, 1083-1101.
21. Fuller, W.A., 1976, Introduction to statistical time series (Wiley, New York).
22. Granger, C.M.J., 1983, Forecasting white noise, in applied time series analysis of economic data, Bureau of the Census, Washington, DC.
23. Granger, C.W.J. and A.A. Weiss, 1983, Time series analysis of error-corrective models, in Multivaria Statistics (Academic Press, New York).
24. Gregory, A. and T. McCurdy, 1986, The unbiasedness hypothesis in the forward foreign exchange market. A. specification analysis with application to France, Italy, Japan, the U.K. and W. Germany, European Economic Review 30, 365-381.
25. Hakkio, C.S., 1981, Expectation and the forward exchange rate, International Economic Review 22, 663-678.
26. Hsieh, D.A., 1984, Tests of rational expectations and no risk premium in forward exchange markets, Journal of International Economics 24, 129-145.
27. Kendall, J.D. and D.A. McDonald, 1989, Univariate GARCH-M and the risk premium in a foreign exchange market, manuscript, University of Tasmania.
28. McCurdy, T.H. and I. Morgan, 1987, Tests of the Martingale hypothesis for foreign currency with time varying volatility, International Journal of Forecasting 3, 131-148.
29. McCurdy, T.H. and I. Morgan, 1991, Evidence of risk premia in foreign currency futures markets, Review of Financial Studies.
30. Milhoj, A., 1987, A conditional variance model for daily deviation of an exchange rate, Journal of Business and Economic Statistics 5, 99-103.
31. Mussa, M.L., 1979, Empirical regularities in the behaviour of exchange rates and theories of the foreign markets, in: K. Brunner and A.H. Meltzer, eds., Policies for employment, prices and exchange rates, Carnegie-Rochester conference Series on Public Policy, supplement to the Journal of Monetary Economics, 9-57.
32. Phillips, P.C.B., 1987, Time Series Regression with a Unit Root, Econometrica 55, 277-301.
33. Phillips, P.C.B. and P. Perron, 1988, Testing for a Unit Root in Time Series Regression, Biometrika 75, 335-346.
34. Taylor, M.P., 1987, Expectations, risk and uncertainty in the foreign exchange markets: some results based on survey data, Bank of England, discussion paper No. 29, Manchester School 57, 142-153.