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Is the dollar/ECU exchange rate a random walk?

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  • Paul Newbold
  • Toni Rayner
  • Neil Kellard
  • Christine Ennew

Abstract

Monthly data on the $US/ECU exchange rate are analysed in light of the random walk hypothesis. A battery of tests, including procedures that are robust to conditional heteroscedasticity, are applied against linear alternatives to departures from the random walk. These tests are all based on the sample autocorrelations of the series of first differences of the logarithm of the monthly exchange rate. They were applied to the full sample of available data, and also to a subsample consisting of the most recent observations. On the whole, these tests provided just modest evidence against the random walk hypothesis.

Suggested Citation

  • Paul Newbold & Toni Rayner & Neil Kellard & Christine Ennew, 1998. "Is the dollar/ECU exchange rate a random walk?," Applied Financial Economics, Taylor & Francis Journals, vol. 8(6), pages 553-558.
    • Handle: RePEc:taf:apfiec:v:8:y:1998:i:6:p:553-558
    DOI: 10.1080/096031098332583
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    References listed on IDEAS

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    Cited by:

    1. Marcos Alvarez-Diaz & Alberto Alvarez, 2003. "Forecasting exchange rates using genetic algorithms," Applied Economics Letters, Taylor & Francis Journals, vol. 10(6), pages 319-322.
    2. Latha Sreeram & Samie Ahmed Sayed, 2024. "Short-term Forecasting Ability of Hybrid Models for BRIC Currencies," Global Business Review, International Management Institute, vol. 25(3), pages 585-605, June.
    3. Kellard, Neil & Dunis, Christian & Sarantis, Nicholas, 2010. "Foreign exchange, fractional cointegration and the implied-realized volatility relation," Journal of Banking & Finance, Elsevier, vol. 34(4), pages 882-891, April.
    4. Dietmar Janetzko, 2014. "Using Twitter to Model the EUR/USD Exchange Rate," Papers 1402.1624, arXiv.org.
    5. Chuluun, Tuugi & Eun, Cheol S. & Kiliç, Rehim, 2011. "Investment intensity of currencies and the random walk hypothesis: Cross-currency evidence," Journal of Banking & Finance, Elsevier, vol. 35(2), pages 372-387, February.
    6. Dietmar Janetzko, 2014. "Predictive modeling in turbulent times – What Twitter reveals about the EUR/USD exchange rate," Netnomics, Springer, vol. 15(2), pages 69-106, September.

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