Another interesting thing here is that the currency markets do not fall under EMH, both empirically (they are clearly not a random walk) and theoretically (the preconditions for EMH do not hold).
Can you please elaborate on that? Do you mean the prices themselves are not a random walk or do you mean the prices are not a random walk after adjusting for interest rate differences?
And what preconditions don’t hold for currency markets?
Can you please elaborate on that? Do you mean the prices themselves are not a random walk or do you mean the prices are not a random walk after adjusting for interest rate differences?
And what preconditions don’t hold for currency markets?
The currency rates are not a random walk (it’s easy to verify that emprirically) either before or after adjusting for the interest rate parity.
What makes currency markets different is that they have huge powerful players—central banks—which are not driven by the profit motive.