A COINTEGRATION TEST FOR TURKISH FOREIGN EXCHANGE MARKET EFFICIENCY
Journal Title: Asian Economic and Financial Review - Year 2014, Vol 4, Issue 4
Abstract
This study examines the within-country market efficiency of the Turkish foreign exchange markets on the basis of the forward rate unbiasedness hypothesis, in case of the Turkish lira/US dollar and the Turkish lira/Euro for the period February 5, 2005 through July 26, 2013 by Johansen cointegration method. Unit root test results support the market efficiency in its weak-form. However, the existence of cointegration between the forward rates and its corresponding future spot rates with a unitary cointegrating vector and there exists no systematic expectation errors provide evidence for forward rate unbiasedness hypothesis and thus against market efficiency in semi-strong form. In the Turkish lira/US dollar foreign exchange market, the speed of adjustment towards long run equilibrium is a bit faster, and also the forward rates explain a bit more proportion of the movements of the spot rates in comparison with the Turkish lira/Euro market.
Authors and Affiliations
Macide Çiçek| Associate Prof. Dr. Dumlupınar University, Faculty of Economics and Administrative Sciences, Departmant of Economics, Kütahya, Turkey
Keywords
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