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Do exchange rates follow random walks? A variance ratio test of the Zambian foreignexchange market

Southern African Business Review

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Title Do exchange rates follow random walks? A variance ratio test of the Zambian foreignexchange market
 
Creator Mbululu, D
Auret, CJ
Chiliba, L
 
Subject variance ratio tests, random-walk hypothesis, exchange rates, marketefficiency
 
Description The random-walk hypothesis in foreign-exchange rates market is one of the most researched areas, particularly in developed economies. However, emerging markets in sub-Saharan Africa have received little attention in this regard. This study applies Lo and MacKinlay’s (1988) conventional variance ratio test and Wright’s (2000) non-parametric ranks- and signs-based variance ratio tests to examine the validity of the random-walk hypothesis in the Zambian foreign-exchange market. The study utilises daily nominal United States dollar/Zambian kwacha (USD/ZMK) exchange-rate returns for data from August 2003 to December 2012. Both types of variance ratio tests reject the random-walk hypothesis over the data span. The implication is that technical and fundamental analysis can help traders and other investors to earn higher-than-average market returns.Key words: variance ratio tests, random-walk hypothesis, exchange rates, marketefficiency
 
Publisher College of Economic and Management Sciences (UNISA)
 
Contributor
 
Date 2014-12-17
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier http://www.ajol.info/index.php/sabr/article/view/110915
 
Source Southern African Business Review; Vol 17, No 2 (2013); 45-66
1998-8125
1561-896X
 
Language eng
 
Relation http://www.ajol.info/index.php/sabr/article/view/110915/100677
 
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