Technical trading: Is it still beating the foreign exchange market?

Po-Hsuan Hsu, Mark Taylor and Zigan Wang

Journal of International Economics, 2016, vol. 102, issue C, 188-208

Abstract: We carry out a large-scale investigation of technical trading rules in the foreign exchange market, using daily data over 45years for 30 developed and emerging market currencies. Employing a stepwise test to counter data-snooping bias and examining over 21,000 technical rules, we find evidence of substantial predictability and excess profitability in both developed and emerging currencies, measured against a variety of performance metrics. We cross-validate our results using out-of-sample analysis. We find time series and cross-sectional variation in subperiods and cultural and/or geographic groups, respectively, suggesting that temporarily not-fully-rational behavior and market immaturity generate technical predictability and potential excess profitability.

Keywords: Foreign exchange; Technical analysis; Trading rules; Data-snooping bias (search for similar items in EconPapers)
JEL-codes: C53 F31 G15 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (50)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:102:y:2016:i:c:p:188-208

DOI: 10.1016/j.jinteco.2016.03.012

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