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Is MYR/USD a random walk? New evidence from the BDS test

Lim, Kian Ping and Mohamed, Azali and Lee, Hock Ann (2003) Is MYR/USD a random walk? New evidence from the BDS test. Pertanika Journal of Social Sciences & Humanities, 11 (1). pp. 41-49. ISSN 0128-7702; ESSN: 2231-8534

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This study empirically investigates the daily MYR/USD exchange rate return series in the light of the random walk hypothesis. Recent breakthroughs pertaining to non-linear dynamics and chaos, coupled with the rapid acceleration in computer power, have made it possible to more robustly test for the random walk in financial and economic data. This study uses a new non-linear statistical test, namely the Brock-Dechert-Scheinkman (BDS) test to examine whether the MYR/USD exchange rate return series are random walk with the property of being independent and identically distributed. The results overwhelmingly reject the hypothesis that the MYR/USD data examined in this study are random, independent and identically distributed since some cycles or patterns show up more frequently than would be expected in a true random series. These results may have implications for the weak form market efficiency, if the underlying structure can be profitably exploitable, which remains an avenue for further research.

Item Type:Article
Keyword:Random walk; BDS test; Malaysian foreign exchange market
Faculty or Institute:Faculty of Economics and Management
Publisher:Universiti Putra Malaysia Press
ID Code:3409
Deposited By: Nur Izyan Mohd Zaki
Deposited On:26 Nov 2009 09:02
Last Modified:11 Sep 2015 14:16

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