Weak-Form Efficiency of Foreign Exchange Market in the Organisation for Economic Cooperation and Development Countries: Unit Root Test

Juliana Ibrahim, Yasmiza Long, Hartini Ab. Ghani, Safrul Izani Mohd Salleh

Abstract


This paper will look at the weak-form efficiency of the foreign exchange market in thirty (30) Organization for
Economic Cooperation and Development (OECD) countries. We employ Augmented Dickey-Fuller (ADF),
Philip-Perron (PP) and Kwiatkowski-Phillips-Schmidt-Shin analysis to examine for the unit root. Using weekly
data for the period 2000 to 2007, the results for weak-form efficiency using ADF and PP tests indicate that the
exchange rates studied follow random walks. The current value of the exchange rate cannot be predicted using its
past values. In addition, the OECD foreign exchange market consistent with the weak-form of the Efficient Market
Hypothesis.

Full Text: PDF DOI: 10.5539/ijbm.v6n6p55

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International Journal of Business and Management   ISSN 1833-3850 (Print)   ISSN 1833-8119 (Online)

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