The Efficiency of Foreign Exchange Rate Market

Efficient market is one in which prices completely show all possibly available information. In the foreign exchange market this entails market participants to produce a bunch of exchange rates using all available information bearing on the suitable value of exchange rate. Efficient market hypothesis examines whether any information relevant to the market is impulsively reflected in the market prices or not? The purpose of this research is to investigate and provide an objective analysis to address the following questions for a large sample of forecasts. (i) Whether the foreign exchange market of Pakistan is efficient or not, based on the Fama (1970) conjectures of efficiency, and (ii) On the ground of results obtained, experientially analyze for the incidence of Bandwagon effect or herd behavior in the Pakistan Exchange rate market and the presence of profitable trading opportunities.