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Foreign Exchange Market Shocks in the Context of the Global Pandemic (COVID-19)

Foreign Exchange Market Shocks in the Context of the Global Pandemic (COVID-19)

Rui Teixeira Dias, Luísa Carvalho
Copyright: © 2021 |Pages: 15
ISBN13: 9781799866435|ISBN10: 1799866432|EISBN13: 9781799866442
DOI: 10.4018/978-1-7998-6643-5.ch020
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MLA

Dias, Rui Teixeira, and Luísa Carvalho. "Foreign Exchange Market Shocks in the Context of the Global Pandemic (COVID-19)." Handbook of Research on Financial Management During Economic Downturn and Recovery, edited by Nuno Miguel Teixeira and Inês Lisboa, IGI Global, 2021, pp. 359-373. https://doi.org/10.4018/978-1-7998-6643-5.ch020

APA

Dias, R. T. & Carvalho, L. (2021). Foreign Exchange Market Shocks in the Context of the Global Pandemic (COVID-19). In N. Teixeira & I. Lisboa (Eds.), Handbook of Research on Financial Management During Economic Downturn and Recovery (pp. 359-373). IGI Global. https://doi.org/10.4018/978-1-7998-6643-5.ch020

Chicago

Dias, Rui Teixeira, and Luísa Carvalho. "Foreign Exchange Market Shocks in the Context of the Global Pandemic (COVID-19)." In Handbook of Research on Financial Management During Economic Downturn and Recovery, edited by Nuno Miguel Teixeira and Inês Lisboa, 359-373. Hershey, PA: IGI Global, 2021. https://doi.org/10.4018/978-1-7998-6643-5.ch020

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Abstract

This chapter analyzes the efficiency, in its weak form, in the international exchange markets from January 1st, 2019 to July 21st, 2020. The results show that the foreign exchange markets show very high levels of integration, which may jeopardize portfolio diversification as well as possible hedging operations. The detrended fluctuation analysis (DFA) shows that the EUR.GBP, GBP.USD, USD.REAL foreign exchange markets show some signs of (in)efficiency showing persistence in yields, while the EUR.JPY, EUR.USD, JPY.CHF, USD.CHF, USD.JPY markets show signs of anti persistence (i.e., the existence of short memories). The USD.BITCOIN, USD.CAD markets do not reject the random walk hypothesis, that is, they are in equilibrium. By way of conclusion, the authors show that the uncertainty of the 2020 pandemic crisis has affected the memory properties of the foreign exchange markets since some returns can be expected, creating opportunities for arbitrage and abnormal profits.

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