A re-examination of variance-ratio test of random walks in foreign exchange rates
Title:
A re-examination of variance-ratio test of random walks in foreign exchange rates
Author:
Chang, Yuanchen
Appeared in:
Applied financial economics
Paging:
Volume 14 (2004) nr. 9 pages 671-679
Year:
2004-06-01
Contents:
This paper employs a variance ratio test to reexamine the random walk hypothesis for the Canadian dollar, French franc, Deutsche mark, Japanese yen and British pound. In addition to standard normal test statistics, the bootstrap resampling technique is used to calculate the significance levels of variance ratio statistics over the period 7 August 1974 to 30 December 1998. The results provide evidence rejecting the random walk hypothesis for the Japanese yen over the entire sample, while the results for the other four currencies are inconclusive. Furthermore, subperiod results show that from 1989 onwards the random walk hypothesis cannot be rejected for the Canadian dollar, French franc, Deutsche mark, and British pound.
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