Unit Roots Tests: Evidence from the Foreign Exchange Futures Market

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Abstract
In this paper, tests are conducted for the presence of unit roots in the autoregression representation of foreign exchange currency futures price series. The results obtained from five different currency futures over the 1977-1983 period suggest that foreign currency futures rates have autoregressive representations with a single unit root (i.e., borderline nonstationarity). In view of this result, it appears that the process generating the natural logarithm of foreign currency futures rates may well be approximated by random walks.

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