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Article
Random walks in the U.K. pound/ U.S. dollar exchange rates
International Review of Financial Analysis (1998)
  • Bert J SMOLUK, University of Southern Maine
  • Geraldo M. Vasconcellos, Lehigh University
  • Jonathan K. Kramer, Kutztown University of Pennsylvania
Abstract
Since the adoption of flexible exchange rates in the early 1970s, tests of foreign exchange rate efficiency have abounded and can be categorized into three main approaches. The first approach is to examine exchange rates in an arbitrage context to determine if they are out of parity with interest rates or other exchange rates. The second approach to efficiency testing concerns the ability of forward exchange rates to predict corresponding future spot rates. The third approach to exchange rate efficiency testing is to examine exchange rates as a time series to determine whether or not they follow a random walk. This paper follows the third approach to exchange rate efficiency testing. Efficiency testing of exchange rates under the null hypothesis of the random walk is a natural progression in the research of exchange rate determination.
Keywords
  • Foreign Exchange rates,
  • Variance ratios,
  • Market efficiency
Disciplines
Publication Date
1998
Publisher Statement
DOI: 10.1016/S1057-5219(99)80039-8 http://www.journals.elsevier.com/international-review-of-financial-analysis/
Citation Information
Bert J SMOLUK, Geraldo M. Vasconcellos and Jonathan K. Kramer. "Random walks in the U.K. pound/ U.S. dollar exchange rates" International Review of Financial Analysis Vol. 7 Iss. 1 (1998)
Available at: http://works.bepress.com/bert_smoluk/9/