INDIVIDUAL FOREIGN EXCHANGE INVESTORS, RETURN PREDICTABILITY AND MARKET TIMING

Moustafa Abuelfadl ()
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Moustafa Abuelfadl: School of Business, Ithaca College, 953 Donby Road, Ithaca, NY 14850, USA

Annals of Financial Economics (AFE), 2017, vol. 12, issue 01, 1-28

Abstract: This study tests whether individual foreign exchange (Forex) investors can predict future returns, time the market and generate alpha after transaction costs. Using a sample of 1,231 Forex trading accounts and 72,072 trades, the results show that individual Forex investors can predict future returns up to eight days after trade execution, even after controlling for Volatility. The results of return predictability are significant because they support the idea that linear independence is rejected as well as provide empirical evidence that private information is available in the foreign exchange market.

Keywords: International finance; exchange rates; foreign currency; foreign exchange; money price; peg; PPP; risk premia; spot rate; forecasting exchange rates (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1142/S2010495217500014

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