Response of financial markets to announcements of the Australian current account balance

Article Abstract:

This paper documents the response of exchange rates, interest rates and stock prices to monthly announcements of the Australian current account balance. Survey data on market participants' expectations and forecasts generated from ARIMA time series models are used to identify the unexpected component of the announcements. The study also controls for day-of-the-week effects that have been documented in the Australian equity market. The results support the efficient market hypothesis and show a significant depreciation of the Australian dollar in foreign exchange markets and a significant rise in both short- and long-term interest rates to announcements of larger than expected current account deficits. The study was, however, unable to find evidence of a significant stock price response to the current account announcements. (Reprinted by permission of the publisher.)

Balance of payments, Stock-exchange, Stock exchanges, Foreign exchange, Interest rates, Balance of trade, Current events

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Do Australian spot foreign exchange rates still show evidence of cointegration?

Article Abstract:

Informational efficiency in the Australian spot foreign exchange market has been examined by other authors, but most of these studies examine a time span that covers the immediate post-float period. This article analyzes a period that begins nearly three and a half years after the floating of the Australian dollar and applies Johansen's test to detect any cointegrating relationship in a system of five foreign currencies. It finds no evidence of cointegration and, therefore, supports the proposition of informational efficiency in the foreign exchange market. This result is in contrast to most other such studies of the Australian market and may be partly due to the increasing maturity and sophistication of the market participants in dealing with a floating currency. (Reprinted by permission of the publisher.)

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Multivariate cointegration testing of the efficiency of Australia's spot FOREX market

Article Abstract:

Efficiency in Australia's spot FOREX market is tested daily, weekly and four-weekly data subsequent to the floating of the dollar in 1983. Earlier research using pairwise cointegration tests of currency markets has suggested little evidence of market inefficiencies. However, multivariate cointegration tests carried out in the paper, based on canonical transformation of the exchange rate data, suggest the existence of long run equilibrium relationships among the spot rates, implying the existence of market inefficiency in the FOREX market. (Reprinted by permission of the publisher.)

Research, Spot market

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