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Testing for weak form market efficiency in Indian foreign exchange market

Sasikumar, Anoop (2011): Testing for weak form market efficiency in Indian foreign exchange market. Published in: The IUP Journal of Monetary Economics , Vol. 9, No. 3 (August 2011): pp. 7-19.

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Abstract

This paper attempts to examine the weak form of market efficiency in the Indian foreign exchange market using a family of variance ratio tests. Monthly Nominal Effective Exchange Rate (NEER) data from April 1993-June 2010 were used for the analysis. NEER series was considered for the analysis as it is supposed to capture more information compared to the bilateral exchange rates. Three individual variance ratio tests as well as three joint variance ratio tests were used for the purpose of analysis. After analyzing the results from both individual and joint variance ratio test, it was concluded that Indian foreign exchange market does not exhibit weak form of market efficiency.

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