INFORMATION EFFICIENCY HYPOTHESIS - THE FINANCIAL VOLATILITY IN THE CZECH REPUBLIC CASE

If there is any market which is said to be effective, this is the the FOREX market. Here we are able to confirm in the most suitable way the Market Efficiency Hypothesis. But we must always consider the risk premium existence, which is more interconnected with the existence of term premium in bond market. Presented alternative yields are opportunity yields which influence the investment behavior. The FOREX market is also very volatile. In this article we provide analysis of volatility in order to make useful evidence of the behavior of financial assets. The main purpose of this article is to analyze the volatility of FOREX market using the autoregressive processes. There are many approaches for volatility modelling. These are the GARCH model approach (Generalized Autoregressive Conditional Heteroscedasticity) or its modifications (EGARCH, IGARCH). The efficient model for stochastic volatility enables us to specify the proper price of particular financial security. In this article we will provide the evidence from the Czech FOREX market in comparison with the conclusions of the market efficiency hypothesis.