Exchange rate market efficiency: further evidence from cointegration tests

Abstract

This paper examines the hypothesis that foreign exchange market is efficient. Several empirical results from earlier studies have been based on the implicit assumption that time-series data are stationary. But we use cointegration techniques, which imply that time-series data are non-stationary, to test for market efficiency, using Japanese data drawn from the Wall Street Journal. Our results suggest that the Japanese foreign exchange market is inconsistent with the efficiency hypothesis.