Market inefficiency identified by both single and multiple currency trends

T. Tokár and D. Horváth

Physica A: Statistical Mechanics and its Applications, 2012, vol. 391, issue 22, 5620-5627

Abstract: Many studies have shown that there are good reasons to claim very low predictability of currency returns; nevertheless, the deviations from true randomness exist which have potential predictive and prognostic power [J. James, Simple trend-following strategies in currency trading, Quantitative finance 3 (2003) C75–C77]. We analyze the local trends which are of the main focus of the technical analysis. In this article we introduced various statistical quantities examining role of single temporal discretized trend or multitude of grouped trends corresponding to different time delays. Our specific analysis based predominantly on Euro–dollar currency pair data at the one minute frequency suggests the importance of cumulative nonrandom effect of trends on the potential forecasting performance.

Keywords: Inefficiency of financial markets; Trend following strategy; Analysis of currency-exchange time series (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:391:y:2012:i:22:p:5620-5627

DOI: 10.1016/j.physa.2012.06.038

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