Efficiency of Australian foreign exchange and forward markets : an empirical analysis

McGrath, Dominic J. (1991). Efficiency of Australian foreign exchange and forward markets : an empirical analysis Honours Thesis, School of Business, The University of Queensland.

       
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Author McGrath, Dominic J.
Thesis Title Efficiency of Australian foreign exchange and forward markets : an empirical analysis
School, Centre or Institute School of Business
Institution The University of Queensland
Publication date 1991
Thesis type Honours Thesis
Total pages 114
Language eng
Subjects 14 Economics
Formatted abstract This thesis examines the efficiency of the Australian foreign exchange and forward market between the first of January, 1986 and the first of August, 1991 for four currency relationships. Market efficiency is investigated with respect to purchasing power parity, covered interest rate parity, Fishers theorem and the unbiased forward rate hypotheses. Results, while in general consistent with the above parity conditions, indicate that significant deviations from such conditions existed within the Australian market during the period examined. However this thesis adopts the view that such results need not be inconsistent with market efficiency. Also, consistent with recent literature in the field, this study argues that included in returns in the foreign exchange market is a risk premium. Engle's test for an ARCH process is employed, where the existence of an ARCH process may be consistent with the existence of a risk premium. However while significant results are obtained from tests of the ARCH process, the conclusions drawn from this are limited.

 
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