Testing for random walk in euro exchange rates using the subsampling approach

Abstract

This study utilizes variance ratio tests based on the subsampling approach to test the behaviour of euro-based exchange rates markets. Results are mixed, although the random walk behaviour is dominant among the three major currencies namely the Japanese yen, the US dollar and the British pound.

Acknowledgement

Jorge Belaire-Franch acknowledges financial support from the Ministerio de Ciencia y Tecnlogía, project SEC2003–09205.

Notes

¹ Note that M_{rT ,0}(k) = M_r (k).

² Alternatively, we could compute two-sided equal-tailed intervals. However, symmetric confidence intervals are expected to have better finite sample performance (Romano and Wolf, 2001).