Title: Efficiency of the foreign exchange markets in South Asia

Authors: Abdullah M. Noman, Minhaz U. Ahmed

Addresses: Faculty of Business Administration, American International University, Kemal Ata Turk Avenue, Banani, Dhaka 1213, Bangladesh. ' College of Business Administration, Zhejiang Gongshang University, Zhejiang, Hangzhou, 310018 China

Abstract: This paper examines the weak form efficiency of the foreign exchange markets in seven SAARC countries using monthly return series for each of these markets over a period of 21 years (1985-2005). We applied a battery of unit root tests and variance ratio tests (individual and multiple) to see whether the return series (and also the raw data) follow a random walk process. Our results suggest that the increments of the return series are not serially correlated. Therefore, we conclude that foreign exchange markets in SAARC countries are weak form efficient.

Keywords: exchange rates; market efficiency; variance ratio test; random walk; South Asian Association for Regional Cooperation; SAARC; foreign exchange markets; South Asia.

DOI: 10.1504/AAJFA.2009.028910

Afro-Asian Journal of Finance and Accounting, 2009 Vol.1 No.4, pp.295 - 305

Published online: 11 Oct 2009 *

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