38 From a reading of Appendix 8, carry out a variance ratio test measuring Z(k) for a particular currency chosen from your institution’s database or from Oanda.com. Choose at least 30 observations for the longer time period (e.g. 30 months or 30 quarters).

a Carry out the test for real exchange rates and nominal exchange rates.

b Explain the meaning of your results.

As a practical note if you need to convert daily data into monthly quarterly data or even simply take every fifth or tenth etc. quotet, this can be done using a basic EXCEL package. The following is a guide suitable only for those familiar with EXCEL. Typically the information is in two columns ‘mm/dd/yy’ and the ‘exchange rate’ in columns A and B respectively.
To select the first exchange rate in every month use the ‘text to columns’ feature under the ‘data’ heading and isolate the month, day and year into separate columns. Then in blank columns copy the date and exchange rate if the exchange rate is the first of the month as follows. The formula: ‘¼IF(A2 ¼ A1,’’’’,B2’
or whatever you want to copy) will copy the data into the blank cell if it is the first quote of the month otherwise the cell will be left blank. Create the first line and Block Copy down the column. Then Block Copy all these cells and paste them as a block into their existing location using the paste special formula checking the ‘values’ radio button, this gets rid of the IF formulas.
Block the whole area and sort on the year in ascending order. Exchange rates are now in monthly intervals!
To get every fifth or tenth quote etc. replace the months column as follows: put a 1 in the top cell, say A1, below that in A2 enter ‘¼IF(A1 ¼ 5, 1,A1þ1)’
and block copy down the column. Then proceed as above from the amended formula ‘¼IF(A2 ¼ 5,’’’’, B2’ or whatever you want to copy)!