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This paper defines and tests a form of market efficiency called market which requires that asset prices adjust instantaneously and completely response to new information. Examining the behavior of the yen/dollar rate while each of the major markets are open it is possible to test informational effects from one market to the next. Assuming that news has country specific autocorrelation such as a heat wave. any intra-daily spillovers (meteor showers) become evidence against market dexterity. models are employed to model heteroskedasticity across intra-daily market. Statistical tests lead to the rejection of the heat wave and therefore market dexterity hypothesis. Using a volatility type of vector we examine the impact of news in one market on the time path of in other markets.
Engle et al. (1990) studied this question.