Testing exchange rate efficiency: the case of euro-dollar

This paper tests the semi-strong efficiency of the euro-dollar currency market by introducing a simple heuristic test, based on the 'general-to-specific' methodology and meant to include as two specific sub-cases the 'efficient market hypothesis' (EMH) in the currency market as well as alternative theories implying a time dependent process of propagation of information. According to the results of our nested test, the 'efficient market hypothesis' in the euro-dollar currency market is rejected.