FX technical trading rules can be profitable sometimes!

Nima Zarrabi, Stuart Snaith and Jerry Coakley

International Review of Financial Analysis, 2017, vol. 49, issue C, 113-127

Abstract: This paper investigates the profitability of technical trading rules in the foreign exchange market taking into account data snooping bias and transaction costs. A universe of 7650 trading rules is applied to six currencies quoted in U.S. dollars over the 1994:3–2014:12 period. The Barras, Scaillet, and Wermers (2010) false discovery rate method is employed to deal with data snooping and it detects almost all outperforming trading rules while keeping the proportion of false discoveries to a pre-specified level. The out-of-sample results reveal a large number of outperforming rules that are profitable over short periods based on the Sharpe ratio. However, they are not consistently profitable and so the overall results are more consistent with the adaptive markets hypothesis.

Keywords: Technical trading; False discovery rate; Persistence analysis; Exchange rate (search for similar items in EconPapers)
JEL-codes: C12 C15 F31 G11 G14 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1057521916301958
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:49:y:2017:i:c:p:113-127

DOI: 10.1016/j.irfa.2016.12.010

Access Statistics for this article

International Review of Financial Analysis is currently edited by B.M. Lucey

More articles in International Review of Financial Analysis from Elsevier
Bibliographic data for series maintained by Catherine Liu ().