A Comparative Analysis of Weak and Semi-Strong Form Efficiency of Nigerian and South African Foreign Exchange Market
Journal Title: Journal of Economics, Finance and Management Studies - Year 2021, Vol 4, Issue 07
Abstract
Foreign exchange market is said to be efficient if all available information are reflected in its exchange rates. An efficient foreign exchange translates to absence of profitable and exploitable trends which means that it is impossible for market participants or private agents to outperform the market. This study investigated the weak and semi-strong form efficiency of Nigerian and South African foreign exchange market to determine the significance of past exchange rates in predicting the present rate which is the test of weak form efficiency and it examined the co-integration relationships between selected pairs of exchange rate to determine the semi-strong efficiency. The secondary data used in this study were sourced mainly from the Central Bank of Nigeria Statistical Bulletin, the South African Reserve Bank Bulletin and the oanda exchange rate websites. The data used were the inter-bank spot exchange rates of Naira and Rand to Swiss Franc, Euro, Pounds, Dollar and Yen for the period of January 2010 to December 2017. The Augmented Dickey Fuller (ADF) test and the Phillip Peron (PP) test were employed to determine the weak form efficiency while the Variance Decomposition, Granger Causality and Co-integration tests were used to determine the semi-strong form efficiency of both countries. The results of the study revealed that the Nigerian foreign exchange market is efficient in the weak and semi-strong form at 5% level of significance while the weak form efficiency of South African foreign exchange market revealed mixed results. The market is efficient in the weak form except for the case of Rand to Dollar and Rand to Yen which showed inefficiency. The market is equally efficient in semi-strong form. The study concluded that market participants cannot make exploitable profits by trading in both markets because all past and publicly available information are already incorporated in the prices of exchange rates. It was therefore recommended that the inter-bank market in both countries should be well monitored and managed by the regulatory authorities so as to promote the effective and efficient smooth functioning of the foreign exchange market as well as achieving a stable and realistic exchange rates.
Authors and Affiliations
Adetan, Taiwo Temitayo
Keywords
Related Articles
- EP ID EP705385
- DOI 10.47191/jefms/v4-i7-30
- Views 99
- Downloads 0
The Effect of Inventory Turnover, Cash Turnover, and Receivable Turnover on Profitability at Telecommunication Companies during the Covid-19 Pandemic
This study aimed at analyzing three different turnovers of current asset elements: the inventory turnover, the cash turnover, and the receivable turnover on profitability. Data is taken in the form of financial statement...
Higher Education System in The Republic of Uzbekistan: Modern Trends and Developments
The article discusses the international and domestic experience in the higher education development of the Republic Uzbekistan, implementation of different education forms, reveals the recent trends and its analysis has...
How to Validate Consumer Self-Actualization or Narcissism through Social Media Services??
This research takes the perspective of tour and travel service companies in providing services through consumer self-actualization behavior or narcissism and adopts Maslow's hierarchy of needs framework to capture motiva...
Analysis of Service Quality in the Restaurant Sector in the State of Tlaxcala Using The Servqual Model
The restaurant industry in Mexico generates a great economic benefit, especially Mexican food that generates a great impact worldwide due to the fact that it was named by UNESCO in 2010 as a cultural heritage of humanity...
Resilience, a Relevant Strategy for the Recovery of Tourist Destinations
The resilience of tourist destinations is nowadays an essential means for a successful and efficient management of all sectors. In Morocco, the tourism sector, whose revenues are ranked third nationally, should be streng...