The Informational Efficiency of Weekly Money Announcements An Econometric Critique
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Abstract
Studies of the weekly money announcement have found markets to be informationally efficient. We demonstrate that this result apparently is related to one or more sources of bias and measurement error that have been introduced to the estimating equations of previous studies. After correcting for these sources of bias and estimating the modified model over the samples employed in earlier studies, we still find evidence to reject the hypothesis of informational efficiency. An alternative explanation is that auxiliary assumptions imposed for empirical convenience introduce measurement error that affects standard tests of the efficient-markets hypothesis.