Abstract

This paper is to attempts an analysis of bid -ask spread rates charging among the Malaysian banks. Estimating the bid-ask spread in the absence of recorded data is a puzzled for financial researchers.

Thus, addressed this issue and done analysis using daily data for determinant the right banks. There are several researches have conducted based on bid -ask spread volatility and trading volume. This model not yet tested before in terms of bid- asks spread among the Malaysian banks and these studies are conducted as a test.

The second objective to forecast exchange rate movements for eight currencies. Forecasting estimation are very important components and fairly simple before the world war II. During the years of Bretton woods system are longer period of exchange rate stability.

Despite of inherent problems, pegged are one of the reasons to price prediction. Furthermore, they are many readjustment of systems, economic stability, market inefficient, arbitrage opportunities and hedging are lending of degree to exchange rate predictions. Thus, this model is used one-year historical data and forecasted the exchange rate movements.

The results showed that the forecasted rates significantly didn’t match the actual prices and that the prices follow the random walk process. A further improved study will be needed to explore further into this result.