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Return Predictability: Evidence from Nigeria's Foreign Exchange Parallel Market

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  • Ayogu, Melvin D

Abstract

Using a simple method that is based on the likelihood ratio test of Dickey and Fuller (1981), we test for predictability of short run currency movements in Nigeria 's foreign exchange parallel market. The intuition is that in an efficient market with unpredictable information arrival, asset prices should follow a martingale process over short-term intervals. We find that the market is not information-efficient with respect to past prices. Therefore, short-term returns are predictable. Copyright 1997 by Oxford University Press.

Suggested Citation

  • Ayogu, Melvin D, 1997. "Return Predictability: Evidence from Nigeria's Foreign Exchange Parallel Market," Journal of African Economies, Centre for the Study of African Economies, vol. 6(2), pages 296-313, July.
    • Handle: RePEc:oup:jafrec:v:6:y:1997:i:2:p:296-313
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