DOES EXCHANGE RATE FOLLOW THE WEAK FORM MARKET EFFICIENCY IN NEXT 11 COUNTRIES? EVIDENCE FROM COMPREHENSIVE UNIT ROOT TESTS

Öz

Examining the efficiency of the market is a substantial issue for economies particularly in developing markets. The purpose of this study is to investigate the validity of weak-form market efficiency by using linear and nonlinear unit root tests of the exchange rate against the US dollar of the Next 11 countries over the period of January 1998 until December 2019. To this effect, we firstly perform the Harvey et al. (2008) linearity test to determine the characteristics of the series. Afterward, in order to examine the weak-form market efficiency, KPSS (1992), Zivot-Andrews (1992) and Lee-Strazicich (2013) tests were applied to linear series while Kapetanios et al. (2003) and Kruse (2011) tests were performed to nonlinear series. Generally, the findings revealed that the validity of the weak-form market efficiency is accepted for the Next 11 countries’ exchange rate. Depending on these results, the majority of the Next 11 countries’ exchange rate follows random walk hence it can be asserted that the current price of the exchange rate cannot be estimated by evaluating its historical prices. The obtained results also suggest that temporary shocks in the exchange rate leave permanent effects in the majority of Next 11 countries.

Anahtar Kelimeler

• Efficient Market Hypothesis
• Weak Form Market Efficiency
• Exchange Rate
• Linear and Nonlinear Unit Root Tests
• Next 11 Countries

GELECEK 11 ÜLKELERİNDE DÖVİZ KURU ZAYIF FORM PİYASA ETKİNLİĞİNİ TAKİP ETMEKTEDİR Mİ? KAPSAMLI BİRİM KÖK TESTLERİ İLE KANITLAR

Öz

Piyasaların etkinliğinin araştırılması özellikle gelişmekte olan piyasalarda ülke ekonomileri için önemli bir konudur. Bu çalışmanın amacı, 1998-2019 dönemi için Gelecek 11 ülkenin ABD dolarına karşı döviz kurunun doğrusal ve doğrusal olmayan birim kök testleri uygulanarak zayıf form piyasa etkinliğinin geçerliliğini ampirik olarak incelemektir. Bu amaçla serilerin özelliklerini belirlemek için ilk olarak Harvey vd. (2008) doğrusallık testi uygulanmıştır. Daha sonra döviz kuru piyasasında zayıf form piyasa etkinliğini incelemek için, doğrusal olan döviz kuru serileri için KPSS (1992), Zivot-Andrews (1992) ve Lee-Strazicich (2013) birim kök testleri; doğrusal olmayan döviz kuru serileri için Kapetanios vd. (2003) ve Kruse (2011) birim kök testleri uygulanmıştır. Genel olarak bulgular, Gelecek 11 ülkelerinin döviz kurları serileri için zayıf form piyasa etkinliğinin geçerliliğin kabul edildiğini ortaya koymuştur. Bu sonuçlara bağlı olarak, Gelecek 11 ülkelerinin ABD dolar cinsinden döviz kurları rassal yürüyüş hipotezini takip etmektedir böylelikle döviz kurlarının geçmiş fiyat hareketlerinden yola çıkarak gelecek fiyatlarını tahmin etmenin mümkün olmadığı söylenebilir. Elde edilen sonuçlar ayrıca döviz kurundaki geçici şoklar Gelecek 11 ülkelerinin çoğunda kalıcı etkiler bıraktığını göstermektedir.

Anahtar Kelimeler

• Etkin Piyasa Hipotezi
• Zayıf Form Piyasa Etkinliği
• Döviz Kuru
• Doğrusal ve Doğrusal Olmayan Birim Kök Testleri
• Gelecek 11 Ülkeleri

Kaynakça

1. ALTUNOZ, U. (2016). Testing of the weak form market efficiency theory for Borsa Istanbul: Banking sector case. The Journal of International Social Research, 9(43), 1619-1625.
2. ANANZEH, I. E. N. (2014). Testing the Weak Form of Efficient Market Hypothesis: Empirical evidence from Jordan. International Business and Management, 9 (2), 119-123. http://dx.doi.org/10.3968/%25x
3. ANORUO, E. and MURTHY, V. N. R. (2014). Testing nonlinear inflation convergence for the Central African economic and monetary community. International Journal of Economics and Financial Issues, 4(1), 1-7.
4. AZAD, A. S. M. S. (2009). Random walk and efficiency tests in the Asia-Pacific foreign exchange markets: Evidence from the Post-Asian Currency crisis data. Research in International Business and Finance, 23(3), 322-338. https://doi.org/10.1016/j.ribaf.2008.11.001
5. LEVY, R. A. (1900). The theory of random walks: A survey of findings. The American Economist, 11(2), 34-48.
6. BARKOULAS, J., BAUM, C. F. and CHAKRABORTY, A. (2003). Forward premiums and market efficiency: Panel unit-root evidence from the term structure of forward premiums. Journal of Macroeconomics, 25(1), 109-122. https://doi.org/10.1016/S0164-0704(03)00009-0
7. CHARFEDDINE, L. and KHEDIRI, K. B. (2016). Time varying market efficiency of the GCC stock markets. Physica A: Statistical Mechanics and its Applications, 444, 487-504. https://doi.org/10.1016/j.physa.2015.09.063
8. CHARFEDDINE, L., KHEDIRI, K. B., AYE, G. C. and GUPTA, R. (2018). Time-varying efficiency of developed and emerging bond markets: Evidence from long-spans of historical data. Physica A: Statistical Mechanics and its Applications, 505, 632-647. https://doi.org/10.1016/j.physa.2018.04.004

9. CHARLES, A., DARNE, O. and FOULLIOUX, J. (2013). Market efficiency in the European carbon markets. Energy Policy, Elsevier, 60, 785-792. https://doi.org/10.1016/j.enpol.2013.05.036
10. CHEN, M. Y. (2002). Testing stationarity against unit roots and structural changes. Applied Economics Letter, 9 (7), 459-464. https://doi.org/10.1080/13504850110091895
11. CELIK, T. T. and TAS, O. (2007). Etkin piyasa hipotezi ve gelişmekte olan hisse senedi piyasaları, İstanbul Teknik Üniversitesi Dergisi/b, Sosyal Bilimler, 4(12), 11-22.
12. DEMIRELI, E., AKKAYA, G. C. and IBAS, E. (2010). Financial market efficiency: An application on S&P 500 index. Cumhuriyet University Journal of Economics and Administrative Sciences, 11(2), 53-68.
13. ERTUGRUL, H. M. and SOYTAS, U. (2013). The stationarity properties of the industrial production index. İktisat, İşletme ve Finans, 328 (28), 51-66. http://dx.doi.org/10.3848/iif.2013.328.3751
14. FAMA, E. (1970). Efficient capital markets: A review of theory and empirical work. The Journal of Finance, 25(2), 383-417. https://www.jstor.org/stable/2325486
15. FAMA, E. (1965). Random walks in stock market prices. Financial Analysts Journal, 21(5), 55-59.
16. FIROJ, M. and KHANOM, S. (2018). Efficient market hypothesis: Foreign exchange market of Bangladesh. International Journal of Economics and Financial Issues, 8(6), 99-103. https://doi.org/10.32479/ijefi.7097
17. FREUND, W. C., LARRAIN, M. and PAGANO, M. S. (1997). Market efficiency before and after the introduction of electronic trading at the Toronto stock exchange. Review of Financial Economics, 6(1), 29-56. https://doi.org/10.1016/S1058-3300(97)90013-6
18. GIANNELLIS, N. and PAPADOPOULOS, A. P. (2009). Testing for efficiency in selected developing foreign exchange markets: An euilibrium-based approach. Economic Modelling, 26(1), 155-166. https://doi.org/10.1016/j.econmod.2008.06.013
19. GIL-ALANA, L. A., GUPTA, R., SHITTU, O. I. and YAYA, O. S. (2018). Market efficiency of Baltic stock markets: A fractional integration approach. Physica A: Statistical Mechanics and its Applications, 511, 251-262. https://doi.org/10.1016/j.physa.2018.07.029
20. GOZBASI, O., KUCUKKAPLAN, I. and NAZLIOGLU, S. (2014). Re-examining the Turkish stock market efficiency: Evidence from nonlinear unit root tests. Economic Modelling, 38, 381-384.
21. GUJARATI, D. N. (2003). Basic Econometrics. Boston: McGraw-Hill.
22. GUJURATI, D. N. (2012). Basic Econometrics. Noida: Tata McGraw-Hill Education.
23. GUPTA, R. and BASU, P. (2007). Weak form efficiency in Indian stock markets. International Business and Economics Research Journal, 6(3), 57-64. https://doi.org/10.19030/iber.v6i3.3353
24. GUMUS, F. B. and Zeren, F. (2014). Analyzing the efficient market hypothesis with the fourier unit root tests: Evidence from G-20 countries. Ekonomski Horizonti, 16(3), 225-237.
25. HARVEY, D. I. and LEYBOURNE, S. J. (2007). Testing for time series linearity. Econometrics Journal, 10(1), 149-165. https://www.jstor.org/stable/23116683 HARVEY, D. I., LEYBOURNE, S. J. and XIAO, B. (2008). A powerful test for linearity when the order of integration is unknown. Studies Nonlinear Dynamics and Econometrics, 12(3), 1-24.
26. HASANOV, M. and OMAY, T. (2007). Are the transition stock markets efficient? Evidence from non-linear unit root tests. Central Bank Review, 2(2007), 1-12.
27. HILL, J. B. and MOTEGI, K. (2019). Testing the white noise hypothesis of stock returns. Economic Modelling, 76, 231-242. https://doi.org/10.1016/j.econmod.2018.08.003 JEBABLI, I. and ROUBAUD, D. (2018). Time-varying efficiency in food and energy markets: Evidence and implications. Economic Modelling, 70, 97-114.
28. JENSEN, M. (1978). Some anomalous evidence regarding market efficiency. Journal of Financial Economics, 6(2-3), 95-101. https://doi.org/10.1016/0304-405X(78)90025-9
29. IBRAHIM, J., LONG, Y., GHANI, H. A. and SALLEH, S. I. M. (2011). Weak-form efficiency of foreign exchange market in the organisation for economic cooperation and development countries: Unit root test. International Journal of Business and Management, 6(6), 55-65.
30. KAPETANIOS, G., SHIN, Y. and SNELL, A. (2003). Testing for a unit root in the nonlinear star framework. Journal of Econometrics, 112(2), 359-379. https://doi.org/10.1016/S0304-4076(02)00202-6
31. KHEDIRI, K. B. and CHARFEDDINE, L. (2015). Evolving efficiency of stock and future energy markets: A rooling sample approach. Journal of Behavioral and Experinental Finance, 6(C), 67-79.
32. KRUSE, R. (2011). A new unit root test against ESTAR based on a class of modified statistics. Statistic Papers, 52(1), 71-85. https://doi.org/10.1007/s00362-009-0204-1
33. KWIATKOWSKI, D., PHILLIPS, P. C. B., SCHMIDT, P. and SHIN, Y. (1992). Testing the null hypothesis of stationarity against the alternative of a unit root. Journal of Econometrics, 54(1992), 159-178.
34. LEE, C., TSONG, C. C. and LEE, C. F. (2014). Testing for the efficient market hypothesis in stock prices: International evidence from nonlinear heterogeneous panels. Macroeconomic Dynamics, 18(4), 943-958. https://doi.org/10.1017/s1365100512000697
35. LEE, J. and STRAZICICH, M. C. (2003). Minimum lagrange multiplier unit root test with two structural breaks. The Review of Economics and Statistics, 85(4), 1082-1089.
36. LEE, J. and STRAZICICH, M. C. (2013). Minimum LM unit root test with one structural break. Economics Bulletin, 33(4), 2483-2492.
37. LEVY, R. (1967). The theory of random walks: A survey of findings. The American Economist, 11(2), 34-48.
38. MATEBEJANA, G., MOTLALENG, G. and Juana, J. (2017). Foreign exchange market efficiency in Botswana. Review of Economie and Business Studies, 10(1), 103-125.
39. MENSI, W., TIWARI, A. K. and AL-YAHYAEE, K. H. (2018). An analysis of the weak form efficiency, multifractality and long memory of global, regional and European stock markets. The Quarterly Review of Economics and Finance, https://doi.org/10.1016/j.qref.2018.12.001.
40. MENSI, W., HAMDI, A. and YOON, S. M. (2018). Modelling multifractality and efficiency of GCC stock markets using the MF-DFA approach: A comparative analysis of global, regional and Islamic markets. Physica A: Statistical Mechanics and its Applications, 503, 1107-1116.
41. NARAYAN, P. K. and SMYTH, R. (2004). Is South Korea’s stock market efficient? Applied Econometrics Letters, 11(11), 707-710. https://doi.org/10.1080/1350485042000236566
42. NEWEY, W. K. and WEST, K. D. (1987). A simple, positive semi-definite, heteroskedasticity and autocorrelation consistent covariance matrix. Econometrica, 55(3), 703-708.
43. NISAR, S. and HANIF, M. (2012). Testing weak form of efficient market hypothesis: Empirical evidence from South-Asia. World Applied Sciences Journal, 17(4), 414-427.
44. NITM, C. G., ENGLISH, J., NWACHUKWU, J. and WANG, Y. (2015). On the Efficiency of the global gold markets. International Review of Financial Analysis 41, 218-236.
45. ROBERT, A. L. (1967). The theory of random walks: A survey of findings. The American Economist, 11(2), 34-48.
46. PELE, D. T. and VOINEAGU, V. (2008). Testing Market efficiency via decomposition of stock return. application to Romanian capital market. Romanian Journal of Economic Forecasting, 3(2008), 63-79.
47. PERRON, P. (1989). The great crash, the oil price shock and the unit root test hypothesis. Econometrica, 57(6), 1361-1401. https://www.jstor.org/stable/1913712 PERRON, P. (1997). Further evidence on breaking trend functions in macroeconomic variables. Journal of Econometrics, 80(2), 355-385. https://doi.org/10.1016/S0304-4076(97)00049-3
48. RIZVI, S. A. R. and ARSHAD, S. (2017). Analysis of the efficience-integration nexus of Japanese stock market. Physica A: Statistical Mechanics and its Applications, 470, 296-308. https://doi.org/10.1016/j.physa.2016.11.142
49. SAJID, A., SHAHZAD, S. J. H., RAZA, N. and AL-YAHYAEE, K. H. (2018). Stock market efficiency: A comparative analysis of Islamic and conventional stock markets. Physica A: Statistical Mechanics and its Applications, 503, 139-153. https://doi.org/10.1016/j.physa.2018.02.169
50. SAMUELSON, P. A. (1965a). Rational theory of warrant pricing. Industrial Management Review, 6(2), 13-39. https://doi.org/10.1007/978-3-319-22237-0_11
51. SAMUELSON, P. A. (1965b). Proof that properly anticipated prices fluctuate randomly. Industrial Management Review, 6, 41-49. https://doi.org/10.1142/9789814566926_0002 SCHWERT, G. W. (1989). Tests for unit roots: A Monte Carlo investigation. Journal of Business and Economic Statistics, 7(2), 147-159. https://www.jstor.org/stable/1391432
52. SHILLER, I. and RADIKOKO, I. (2014). Testing weak-form market efficiency on the TSX. The Journal of Applied Business Research, 30(3), 647-658. https://doi.org/10.19030/jabr.v30i3.8550
53. STAKIC, N., JOVANCAI, A. and KAPOR, P. (2016). The efficiency of the stock market in Serbia. Journal of Policy Modelling, 38(1), 156–165. https://doi.org/10.1016/j.jpolmod.2015.12.001
54. TABAK, B. M. (2007). Testing for unit root bilinearity in the Brazilian stock market. Physica A: Statist. Mechanics and its Applications, 385(1), 261-269. https://doi.org/10.1016/j.physa.2007.06.010
55. TANG, B., SHEN, C. and GAO, C. (2013). The efficiency analysis of the European CO2 futures market. Applied Energy, 112, 1544-1547. https://doi.org/10.1016/j.apenergy.2013.02.017
56. TAS, O. and TOKMAKCIOGLU, K. (2010). Efficient market hypothesis and comovement among emerging markets. Doğuş University Journal, 11(2), 286-301.
57. TIWARI, A. K. and KYOPHILAVONG, P. (2014). New Evidence from the random walk hypothesis for BRICS stock indices: A wavelet unit root test approach. Economic Modelling, 43, 38-41. https://doi.org/10.1016/j.econmod.2014.07.005
58. YILANCI, V. and OZCAN, B. (2010). Analyzing the relationship between defense expenditures and GNP for Turkey under structural breaks. Cumhuriyet University Journal of Economics and Administrative Sciences, 11(1), 21-33.
59. YILANCI, V. (2009). Analyzing the unemployment hysteresis for Turkey under structural break. Doğuş University Journal, 10(2), 324-335.
60. WANG, J., ZHANG, D. and ZHANG, J. (2015). Mean reversion in stock prices of seven Asian stock markets: Unit root test and stationary test with fourier functions. International Review of Economics and Finance, 37 157-164. https://doi.org/10.1016/j.iref.2014.11.020
61. WESTERLUND, J. (2013). Simple unit root testing in generally trending data with an application to precious metal prices in Asia. Journal of Asian Economics, 28, 12-27. https://doi.org/10.1016/j.asieco.2013.04.004
62. WICKREMASINGHE, G. B. (2008). Predictability of exchange rates in Sri Lanka: A test of the efficient market hypothesis. Asian Academy of Management Journal of Accounting and Finance, 3(2), 43-59.
63. WORTHINGTON, A. C. and HIGGS, H. (2006). Weak-form market efficiency in Asian emerging and developed equity markets: Comparative tests of random walk behaviour. Accounting Research Journal, 19(1), 5-63.
64. ZHANG, D., WU, T. C., CHANG, T. and LEE, C. H. (2012). Revisiting the efficient market hypothesis for African countries: Panel SURKSS test with a Fourier function. South African Journal of Economics, 80(3), 287-300. https://doi.org/10.1111/j.1813-6982.2011.01314.x
65. ZHAO, X., WU, L. and LI, A. (2017). Research on the efficiency of carbon trading market in China. Renewable and Sustainable Energy Rev., 79, 1-8. https://doi.org/10.1016/j.rser.2017.05.034
66. ZIVOT, E. and ANDREWS, D. W. K. (1992). Further evidence on the great crash, the oil-price shock, and the unit-root hypothesis. Journal of Business & Economic Statistics, 10(3), 251-270. https://doi.org/10.1198/073500102753410372