This paper utilizes the automatic variance ratio
test and Belaire-Franch and Contreras (2004) rank-based tests to examine the
adaptive market hypothesis in Indian exchange rates relative to US dollar
(USD), Great British pound (GBP), Euro and
Japanese yen (Yen). We use overlapping and non-overlapping moving
subsample approach to examine the sensitivity of the results to a particular
sample period. Our findings provide evidence in support of violation of the
martingale hypothesis of Indian exchange rates relative to the US dollar and
Japanese yen for whole sample period. Our findings also provide evidence that
the predictability of returns of Indian exchange rates occurs from time to time
and depends on occurrence of major macroeconomic events. These findings are
consistent with the validity of adaptive market hypothesis in Indian exchange
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