6533b873fe1ef96bd12d5f97

RESEARCH PRODUCT

Testing the Martingale Property of Exchange Rates: A Replication

Dulce ContrerasJorge Belaire-franch

subject

Doob's martingale inequalityEconomics and EconometricsEconometricsApplied mathematicsMartingale difference sequenceMartingale (probability theory)Social Sciences (miscellaneous)AnalysisMathematics

description

In this paper, we test the martingale property of a set of U.S. exchange rates already analyzed in a recent paper by Yilmaz [J. of Buss. and Ec. Stat., 2003]. We claim that the tests used by Yilmaz are not the most convenient to test the martingale hypothesis (or the equivalent martingale difference of the returns); hence, we compute a recently proposed test by Kuan and Lee [Stud. in Nonlin. Dyn. and Econ., 2004] and compare our results to Yilmaz's. Striking differences arise, which can give a clue about the type of data generating process governing the evolution of exchange rates in each sub-period.

yearjournalcountryeditionlanguage
2010-01-14Studies in Nonlinear Dynamics & Econometrics
https://doi.org/10.2202/1558-3708.1796