Efficiency of The Foreign Exchange Rate Market: An Analysis for Turkey

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In the literature, the effectiveness of the foreign exchange market is an important concept for traders and policy makers, if price reflects all information in the market, this market is said to be efficient. In other words, Fama et al. (1969) term of the efficient market were defined as a market which “ adapt quickly to new information”. At the weak form efficiency, in the market, all prices, past prices or returns can be reflected in all the information, on the other hand, at the semi-strong form efficiency, the exchange rates are not only reflect past information concerning exchange rates, but also they are reflect other currency exchange rates and information concerning macroeconomic variables. The main purpose of this study is whether TL / $ and TL / Euro exchange rate markets are efficient at the weak and semi-strong form or not is to analyze by using unit root and cointegration methods with stru ctural breaks during the period 2006:04-2013:12 in Turkey. Analysis results show that the Turkish foreign exchange market is efficient at the weak form and not efficient at the semi-strong form and forward rate unbiasedness hypothesis is not valid for Turkey.

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Turkish foreign exchange market , weak and semistrongform efficiency , forward unbiasedness hypothesis , unitroot and cointegration tests with structural breaks.

Ege Academic Review (EAR)

636

Ege Academic Review (EAR)