Efficiency in BRICS Currency Markets Using Long-Spans of Data: Evidence from Model-Free Tests of Directional Predictability

  • Rangan Gupta University of Pretoria, Pretoria, South Africa
  • Vasilios Plakandaras Democritus University of Thrace, Greece
DOI: https://doi.org/10.22610/jebs.v11i1(J).2756

Abstract

We analyze the directional predictability in foreign exchange markets of Brazil, Russia, India, China and South Africa (BRICS) using the quantilogram, based on long-spans of monthly historical data, at times covering over a century. We find that the efficient market hypothesis (EMH) holds at the extreme phases of the currency markets (and around the median for India and South Africa). Since predictability holds at certain parts of the unconditional distribution of exchange rate returns, we find support for the Adaptive Market Hypothesis (AMH). AMH, based on the idea of bounded rationality, suggests that currency return predictability will be intermittent, due to changing market conditions and institutional factors.

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Published
2019-03-10
How to Cite
Gupta, R., & Plakandaras, V. (2019). Efficiency in BRICS Currency Markets Using Long-Spans of Data: Evidence from Model-Free Tests of Directional Predictability. Journal of Economics and Behavioral Studies, 11(1(J), 152-165. https://doi.org/10.22610/jebs.v11i1(J).2756
Issue
Vol 11 No 1(J) (2019)
Section
Research Paper

Copyright (c) 2019 Rangan Gupta, Vasilios Plakandaras

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