Anusakumar, Shangkari V. and Abdullah, Nur Adiana Hiau (2014) Does the foreign exchange market overreact? Asian Journal of Business and Accounting, 7 (2). pp. 117-138. ISSN 1985-4064

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Abstract

This study uses a sample of 21 currencies to investigate exchange rate behaviour following extreme 1-day exchange rate movements during the period January 2000 to December 2007. Deriving evidence from a post-event cumulative average abnormal return of winners and associated losers, the results lend support to the overreaction hypothesis, underreaction hypothesis, and uncertain information hypothesis.Moreover, there is substantial evidence of investor over-optimism to negative and positive events.The efficient market hypothesis is rejected for all currencies. Contrary to prior studies, currencies of emerging markets do not overreact more than those of the developed markets.The magnitude effect is also not supported. On an aggregate basis, the currency market tends to overreact which implies that the market is not efficient.

Item Type:	Article
Uncontrolled Keywords:	Currency, Efficient Market Hypothesis, Exchange Rate, Overreaction, Underreaction,
Subjects:	H Social Sciences > HF Commerce > HF5601 Accounting
Divisions:	School of Economics, Finance & Banking
Depositing User:	Prof. Dr. Nur Adiana Hiau Abdullah
Date Deposited:	07 Sep 2015 02:20
Last Modified:	17 Apr 2016 07:16
URI:	https://repo.uum.edu.my/id/eprint/15414

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