A sequential purchasing power parity test for panels of large cross- sections and implications for investors
(2015) In European Journal of Finance 21(15). p.1317-1333- Abstract
- In this paper we use monthly time series data for not less than 64 countries and a new sequential approach to test for purchasing power parity (PPP). The results are strong in that the evidence in favor of PPP is very weak. In fact, for the US-dollar-based exchange rates the evidence is basically non-existent. In order to eliminate the effect of the base currency, we also apply the sequential PPP test to all pairs of exchange rates, and find similarly weak evidence of PPP. However, for those rates where evidence is found, using a technical trading rule, we find evidence of significant profits. The predictability of the stationary pairs is therefore important for investors.
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/7969231
- author
- Westerlund, Joakim LU and Narayan, Paresh
- organization
- publishing date
- 2015
- type
- Contribution to journal
- publication status
- published
- subject
- keywords
- sequential unit root tests, real exchange rates, PPP
- in
- European Journal of Finance
- volume
- 21
- issue
- 15
- pages
- 1317 - 1333
- publisher
- Taylor & Francis
- external identifiers
-
- wos:000359906400003
- scopus:85027933494
- ISSN
- 1466-4364
- DOI
- 10.1080/1351847X.2014.948216
- language
- English
- LU publication?
- yes
- id
- 8c4aacb2-98e8-4297-8171-f261621b7506 (old id 7969231)
- date added to LUP
- 2016-04-01 11:16:22
- date last changed
- 2022-01-26 06:46:45
@article{8c4aacb2-98e8-4297-8171-f261621b7506, abstract = {{In this paper we use monthly time series data for not less than 64 countries and a new sequential approach to test for purchasing power parity (PPP). The results are strong in that the evidence in favor of PPP is very weak. In fact, for the US-dollar-based exchange rates the evidence is basically non-existent. In order to eliminate the effect of the base currency, we also apply the sequential PPP test to all pairs of exchange rates, and find similarly weak evidence of PPP. However, for those rates where evidence is found, using a technical trading rule, we find evidence of significant profits. The predictability of the stationary pairs is therefore important for investors.}}, author = {{Westerlund, Joakim and Narayan, Paresh}}, issn = {{1466-4364}}, keywords = {{sequential unit root tests; real exchange rates; PPP}}, language = {{eng}}, number = {{15}}, pages = {{1317--1333}}, publisher = {{Taylor & Francis}}, series = {{European Journal of Finance}}, title = {{A sequential purchasing power parity test for panels of large cross- sections and implications for investors}}, url = {{http://dx.doi.org/10.1080/1351847X.2014.948216}}, doi = {{10.1080/1351847X.2014.948216}}, volume = {{21}}, year = {{2015}}, }