COMMON STOCHASTIC TRENDS AND EFFICIENCY IN THE FOREIGN EXCHANGE MARKET

Within the traditional financial literature about efficient markets there are two interpretations on empirical results, some works find evidence of the predictive superiority of the martingale (martingale hypothesis); while others provide evidence supporting a hypothesis of cointegration among exchange rates. In this context, we analyze triangular arbitrage cointegration relationship, among Dollar-US, Euro and others 20 currencies, to test efficiency market of exchange rates. For this, we consider implicit transaction costs in daily Ask-Bid cointegration relationships with heteroskedasticity covariance matrix, and using alternative methods: cointegration relations with and without heteroskedasticity, and dynamic factorial analysis. We do not find empirical evidence of the lack of arbitrage opportunities, so the results support efficiency of the exchange markets.