Mariana Chambino – ESCE, Polytechnic Institute of Setúbal, Portugal

Nicole Horta – ESCE, Polytechnic Institute of Setúbal, Portugal

Rui Dias – ESCE, Polytechnic Institute of Setúbal, Portugal; Center for Studies and Advanced Training in Management and Economics (CEFAGE), University of Évora, Portugal

Keywords:
Russian invasion-Ukraine;
Econophysic;
Long memories;
Exchange rates

DOI: https://doi.org/10.31410/EMAN.S.P.2023.47

Abstract: In this study, we analyse efficiency, in its weak form, in the ex­change rates AUD/USD (Australian dollar/US dollar), BRL/USD (Brazilian real/US dollar), CHF/USD (Swiss franc/US dollar), EUR/USD (Euro/US dollar), GBP/USD (British pound/US dollar), JYP/USD (Japanese yen/US dollar), RUB/ USD (Russian rouble/US dollar) and SGD/USD (Singapore dollar/US dollar), for the period from January 1st, 2018 to December 31st, 2022. According to the findings, foreign exchange markets in the Tranquil subperiod have mixed results, i.e. The AUD/USD, SGD/USD, and EUR/USD exchange rates are an­ti-persistent, but the JYP/USD, BRL/USD, RUB/USD, and CHF/USD markets are persistent, and the GBP/USD market is in equilibrium. In the period in­cluding the 2020 and 2022 events, we identify long memories in the AUD/ USD, BRL/USD, SGD/USD, RUB/USD exchange rates, anti-persistence in the GBP/USD, JPY/USD, and EUR/USD markets, and signs of equilibrium in the CHF/USD exchange rate. Overall, our findings suggest that market efficiency is hybrid, i.e., the exchange markets studied are rarely in equilibrium during periods of calm or stress. The evidence of oscillation between efficiency and inefficiency may lead currency traders to take full advantage of arbitrage possibilities that appear when market circumstances change.

Download full paper

7th International Scientific Conference – EMAN 2023 – Economics and Management: How to Cope With Disrupted Times, Ljubljana, Slovenia, March 23, 2023, SELECTED PAPERS, published by: Association of Economists and Managers of the Balkans, Belgrade, Serbia; ISBN 978-86-80194-70-7, ISSN 2683-4510, DOI: https://doi.org/10.31410/EMAN.S.P.2023

Creative Commons Non Commercial CC BY-NC: This article is distributed under the terms of the Creative Commons Attribution-Non-Commercial 4.0 License (https://creativecommons.org/licenses/by-nc/4.0/) which permits non-commercial use, reproduction and distribution of the work without further permission. 

Suggested citation
Chambino, M., Horta, N., & Dias, R. (2023). Evolving Efficiency of Exchange Rate Movements: A Test for Major International Currencies. In V. Bevanda (Ed.), International Scientific Conference – EMAN 2023: Vol 7. Selected Papers (pp. 47-59). Association of Economists and Managers of the Balkans. https://doi.org/10.31410/EMAN.S.P.2023.47

REFERENCES

Chiang, S. M., Lee, Y. H., Su, H. M., & Tzou, Y. P. (2010). Efficiency tests of foreign exchange markets for four Asian Countries. Research in International Business and Finance. https://doi.org/10.1016/j.ribaf.2010.01.001  

Dias, R., Alexandre, P., Vasco, C., Heliodoro, P., & Santos, H. (2021). Random Walks and Mar­ket Efficiency: Gold, Platinum, Silver Vs Asia Equity Markets. 5th EMAN Conference Pro­ceedings (Part of EMAN Conference Collection), October, 55–70. https://doi.org/10.31410/eman.2021.55  

Dias, R., da Silva, J. V., & Dionísio, A. (2019). Financial markets of the LAC region: Does the crisis influence the financial integration? International Review of Financial Analysis, 63, 160–173. https://doi.org/10.1016/j.irfa.2019.02.008 

Dias, R., Heliodoro, P., & Alexandre, P. (2020). Efficiency of Asean-5 Markets: An Detrended Fluctuation Analysis. Mednarodno Inovativno Poslovanje = Journal of Innovative Busi­ness and Management, 12(2). https://doi.org/10.32015/jibm.2020.12.2.13-19 

Dias, R., Heliodoro, P., Alexandre, P., Santos, H., & Farinha, A. (2021). Long memory in stock returns: Evidence from the Eastern European markets. SHS Web of Conferences, 91, 01029. https://doi.org/10.1051/shsconf/20219101029 

Dias, R., Heliodoro, P., Alexandre, P., Santos, H., & Vasco, C. (2021). Market Efficiency in Its Weak Form: the Pre-Covid and Covid Indonesia Analysis. 5th EMAN Conference Pro­ceedings (Part of EMAN Conference Collection), October, 1–11. https://doi.org/10.31410/eman.2021.1  

Dias, R., Heliodoro, P., Teixeira, N., & Godinho, T. (2020). Testing the Weak Form of Effi­cient Market Hypothesis: Empirical Evidence from Equity Markets. International Jour­nal of Accounting, Finance and Risk Management, 5(1). https://doi.org/10.11648/j.ijafrm.20200501.14 

Dias, R., Pardal, P., Teixeira, N., & Horta, N. (2022). Tail Risk and Return Predictability for Eu­rope’s Capital Markets: An Approach in Periods of the 2020 and 2022 Crises. https://doi.org/10.4018/978-1-6684-5666-8.ch015 

Dias, R., Pereira, J. M., & Carvalho, L. C. (2022). Are African Stock Markets Efficient? A Com­parative Analysis Between Six African Markets, the UK, Japan and the USA in the Period of the Pandemic. Naše Gospodarstvo/Our Economy, 68(1), 35–51. https://doi.org/10.2478/ngoe-2022-0004 

Dias, R., & Santos, H. (2020). Stock Market Efficiency in Africa: Evidence From Random Walk Hypothesis. 6th LIMEN Conference Proceedings (Part of LIMEN Conference Collection), 6, 25–37. https://doi.org/10.31410/limen.2020.25 

Dias, R. T., & Carvalho, L. (2021a). Foreign Exchange Market Shocks in the Context of the Global Pandemic (COVID-19). May, 359–373. https://doi.org/10.4018/978-1-7998-6643-5.ch020  

Dias, R. T., & Carvalho, L. (2021b). The Relationship Between Gold and Stock Markets During the COVID-19 Pandemic. May, 462–475. https://doi.org/10.4018/978-1-7998-6643-5.ch026 

Dias, R. T., Pardal, P., Santos, H., & Vasco, C. (2021a). COVID-19 Pandemic and Its Influence on Safe Havens. June, 289–303. https://doi.org/10.4018/978-1-7998-6926-9.ch016 

Dias, R. T., Pardal, P., Santos, H., & Vasco, C. (2021b). Testing the Random Walk Hypothe­sis for Real Exchange Rates. June, 304–322. https://doi.org/10.4018/978-1-7998-6926-9.ch017 

Dickey, D., & Fuller, W. (1981). Likelihood ratio statistics for autoregressive time series with a unit root. Econometrica, 49(4), 1057–1072. https://doi.org/10.2307/1912517

Fama, E. F. (1965). Random Walks in Stock Market Prices. Financial Analysts Journal. https://doi.org/10.2469/faj.v21.n5.55 

Fama, E. F. (1970). Efficient Capital Markets: A Review of Theory and Empirical Work. The Journal of Finance. https://doi.org/10.2307/2325486 

Fama, E. F. (1991). Efficient Capital Markets: II. The Journal of Finance. https://doi.org/10.2307/2328565  

Guedes, E. F., Santos, R. P. C., Figueredo, L. H. R., Da Silva, P. A., Dias, R. M. T. S., & Zebende, G. F. (2022). Efficiency and Long-Range Correlation in G-20 Stock Indexes: A Sliding Windows Approach. Fluctuation and Noise Letters. https://doi.org/10.1142/S021947752250033X  

Horta, N., Dias, R., Revez, C., & Alexandre, P. (2022). Cryptocurrencies and G7 Capital Mar­kets Integrate in Periods of Extreme Volatility ? 10(3), 121–130.

Horta, N., Dias, R., Revez, C., Heliodoro, P., & Alexandre, P. (2022). Spillover and Quantita­tive Link Between Cryptocurrency Shocks and Stock Returns: New Evidence From G7 Countries. Balkans Journal of Emerging Trends in Social Sciences, 5(1), 1–14. https://doi.org/10.31410/balkans.jetss.2022.5.1.1-14  

Hortense, S., & Dias, R. (2020). The Interactions of Stock Prices and Exchange Rates in the ASEAN-5 Countries: The DCCA approach.

Im, K. S., Pesaran, M. H., & Shin, Y. (2003). Testing for unit roots in heterogeneous panels. Journal of Econometrics. https://doi.org/10.1016/S0304-4076(03)00092-7 

Jarque, C. M., & Bera, A. K. (1980). Efficient tests for normality, homoscedasticity and se­rial independence of regression residuals. Economics Letters, 6(3), 255–259. https://doi.org/10.1016/0165-1765(80)90024-5  

Lazǎr, D., Todea, A., & Filip, D. (2012). Martingale difference hypothesis and financial crisis: Empirical evidence from European emerging foreign exchange markets. Economic Sys­tems. https://doi.org/10.1016/j.ecosys.2012.02.002 

Levin, A., Lin, C. F., & Chu, C. S. J. (2002). Unit root tests in panel data: Asymptotic and finite-sam­ple properties. Journal of Econometrics. https://doi.org/10.1016/S0304-4076(01)00098-7 

Lo, A. W., & MacKinlay, A. C. (1988). Stock Market Prices Do Not Follow Random Walks: Evidence from a Simple Specification Test. Review of Financial Studies. https://doi.org/10.1093/rfs/1.1.41  

Matebejana, G., Motlaleng, G., & Juana, J. (2017). Foreign Exchange Market Efficiency In Bot­swana. Review of Economic and Business Studies. https://doi.org/10.1515/rebs-2017-0050 

Ning, Y., Wang, Y., & Su, C.-w. (2017). How did China’s foreign exchange reform affect the effi­ciency of foreign exchange market? Physica A: Statistical Mechanics and its Applications, 483, 219-226. https://doi.org/10.1016/j.physa.2017.04.150 

Njindan Iyke, B. (2019). A Test of the Efficiency of the Foreign Exchange Market in Indonesia. Buletin Ekonomi Moneter Dan Perbankan. https://doi.org/10.21098/bemp.v0i0.976 

Pardal, P., Dias, R., Teixeira, N., & Horta, N. (2022). The Effects of Russia ’ s 2022 Invasion of Ukraine on Global Markets : An Analysis of Particular Capital and Foreign Exchange Markets. https://doi.org/10.4018/978-1-6684-5666-8.ch014 

Pardal, P., Dias, R. T., Santos, H., & Vasco, C. (2021). Central European banking sector inte­gration and shocks during the global pandemic (COVID-19). In Handbook of Research on Reinventing Economies and Organizations Following a Global Health Crisis. https://doi.org/10.4018/978-1-7998-6926-9.ch015  

Perron, P., & Phillips, P. C. B. (1988). Testing for a Unit Root in a Time Series Regression. Bi­ometrika, 2(75), 335–346. https://doi.org/10.1080/07350015.1992.10509923

Revez, C., Dias, R., Horta, N., Heliodoro, P., & Alexandre, P. (2022). Capital Market Efficien­cy in Asia: An Empirical Analysis. 6th EMAN Selected Papers (Part of EMAN Conference Collection), 49–57. https://doi.org/10.31410/eman.s.p.2022.49 

Teixeira, N., Dias, R., & Pardal, P. (2022). The gold market as a safe haven when stock markets exhibit pronounced levels of risk : evidence during the China crisis and the COVID-19 pandemic. April, 27–42.

Teixeira, N., Dias, R., Pardal, P., & Horta, N. (2022). Financial Integration and Comovements Between Capital Markets and Oil Markets : An Approach During the Russian. December. https://doi.org/10.4018/978-1-6684-5666-8.ch013 

Vasco, C., Pardal, P., & Dias, R. T. (2021). Do the Stock Market Indices Follow a Random Walk? May, 389–410. https://doi.org/10.4018/978-1-7998-6643-5.ch022 

Share this

Association of Economists and Managers of the Balkans – UdEkoM Balkan
179 Ustanicka St, 11000 Belgrade, Serbia

https://www.udekom.org.rs/home

Udekom Balkans is a dynamic non-governmental and non-profit organization, established in 2014 with a mission to foster the growth of scientific knowledge within the Balkan region and beyond. Our primary objectives include advancing the fields of management and economics, as well as providing educational resources to our members and the wider public.

Who We Are: Our members include esteemed university professors from various scientific disciplines, postgraduate students, and experts from ministries, public administrations, private and public enterprises, multinational corporations, associations, and similar organizations.

Building Bridges Together: Over the course of nine years since our establishment, the Association of Economists and Managers of the Balkans has established impactful partnerships with more than 1,000 diverse institutions across the Balkan region and worldwide.

EMAN conference publications are licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.