Evidence of adaptive markets hypothesis in the foreign exchange market using the USD/Php exchange rate from 1979-2013

This research tested the validity of the adaptive markets hypothesis (AMH), a new theory proposed by Professor Andrew Lo in 2004 as a possible alternative to the efficient market hypothesis (EMH) in the foreign exchange market using the USD/Php exchange rate from 1979-2013. The Martingale difference hypothesis (MDH) has been used to test whether this specific exchange rate conforms to the adaptive markets hypothesis. Of the different MDH test variants, the variance ratio test (Lo & MacKinlay, 1998) and its modern modification the wild bootstrapped AVR test (Kim, 2009) were used. The findings of this research proved that the adaptive markets hypothesis had been accepted in relation to the USD/Php exchange rate from 1979-2013