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Title: |
On the Effects of Exchange Risk on the Foreign
Exchange Market Efficiency |
| Author: |
Bahmani-Oskooee,
Mohsen |
| Author
Affiliation: |
U WI, Milwaukee |
| Source: |
International Economic Journal, Summer 1991, v. 5, no. 2, pp. 77-86 |
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Publication Date: |
Summer 1991 |
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Abstract: |
In this paper we argue that more
volatility in the foreign exchange market contributes to inefficiency in
that market. This hypothesis is tested empirically following a two-step
procedure. In the first step degree of inefficiency in the foreign
exchange market is measured for 17 developed countries using quarterly
time series data over 1973I-1988II period. In the second step these
measures are used in a cross-country regression where degree of
inefficiency is regressed on a measure of exchange-rate volatility of
each country. The empirical results do support our conjecture. |
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