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A sequential purchasing power parity test for panels of large cross-sections and implications for investors

Westerlund, Joakim and Narayan, Paresh 2015, A sequential purchasing power parity test for panels of large cross-sections and implications for investors, European journal of finance, vol. 21, no. 15, pp. 1317-1333, doi: 10.1080/1351847X.2014.948216.

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Title A sequential purchasing power parity test for panels of large cross-sections and implications for investors
Author(s) Westerlund, Joakim
Narayan, Paresh
Journal name European journal of finance
Volume number 21
Issue number 15
Start page 1317
End page 1333
Total pages 17
Publisher Taylor & Francis
Place of publication Abingdon, Eng.
Publication date 2015
ISSN 1351-847X
1466-4364
Keyword(s) PPP
real exchange rates
sequential unit root tests
Summary 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. © 2014 © 2014 Taylor & Francis.
Language eng
DOI 10.1080/1351847X.2014.948216
Field of Research 150202 Financial Econometrics
Socio Economic Objective 900102 Investment Services (excl. Superannuation)
HERDC Research category C1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2014, Taylor & Francis
Persistent URL http://hdl.handle.net/10536/DRO/DU:30068340

Document type: Journal Article
Collection: School of Accounting, Economics and Finance
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