STUDY ON WEAK-FORM EFFICIENCY OF FOREIGN EXCHANGE MARKETS OF DEVELOPING ECONOMIES: SOME INDIA EVIDENCE

This paper examines the empirical validity of the weak-form Efficient Market Hypothesis (EMH) for the foreign exchange market of India, using a battery of (univariate and panel) unit root tests, including those that allow for structural breaks. Monthly exchange rates for three major currencies (China, Indonesia and US) vis the Indian rupee are considered in the empirical analysis. The results indicate that the three exchange rates studied follow a random walk, thus supporting the validity of the weak-form EMH. These results have strong implications for the participant's of the foreign exchange market of India and government policy makers.