Return Predictability: Evidence from Nigeria's Foreign Exchange Parallel Market
Return Predictability: Evidence from Nigeria's Foreign Exchange Parallel Market
Using a simple method that is based on the likelihood ratio test of Dickey and Fuller (1981), we test for predictability of short run currency movements in Nigeria's foreign exchange parallel market. The intuition is that in an efficient market with unpredictable information arrival, asset prices should follow a martingale process over short-term intervals. We find that the market is not information-efficient with respect to past prices. Therefore, short-term returns are predictable.
CITATION: Ayogu, Melvin D.. Return Predictability: Evidence from Nigeria's Foreign Exchange Parallel Market . Oxford : Oxford University Press , 1997. Journal of African Economies Volume 6 Issue 2 July 1997 pp. 296-313 - Available at: https://library.au.int/return-predictability-evidence-nigerias-foreign-exchange-parallel-market