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Can technical trading beat the foreign exchange market in times of crisis?

Ehab Yamani

Global Finance Journal, 2021, vol. 48, issue C

Abstract: I examine the profitability of three simple foreign exchange technical trading rules (moving average, momentum, and relative strength index) before, during, and after the 2007–2008 global financial crisis. These rules significantly improve profitability during the crisis (as opposed to before and after it). The moving average rule significantly increases profitability for exchange rate changes during the crisis. The momentum and relative strength index rules generate significant positive excess currency returns (defined as the difference between the forward premium and spot rate changes), but this profitability is not visible in spot rate changes. These findings are robust for portfolios of developed and emerging market currencies as well as for bilateral exchange rates.

Keywords: Financial crisis; Technical trading rules; Exchange rate; Moving average; Momentum; Relative strength index (search for similar items in EconPapers)
JEL-codes: F31 G01 G14 G15 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:48:y:2021:i:c:s1044028320300818

DOI: 10.1016/j.gfj.2020.100550

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