Empirical Testing Of Random Walk Of Euro Exchange Rates: Evidence From The Emerging Markets

Abstract

This paper utilizes the new non-parametric variance ratio tests based on signs and ranks to examine the random walk hypothesis of Euro exchange rates for 10 Middle Eastern and North African (MENA) currencies.  The results of the new- variance ratio tests reject the random walk hypothesis for all currencies except the Kuwaiti and the Emirate currencies.  Given the improved size and power properties of Wright’s (2000) ranks and signs tests, the results of the new variance ratio tests are robust to the results of the traditional LOMAC variance ratio tests.