A test of momentum trading strategies in foreign exchange markets: evidence from the G7

Robert Bianchi, Michael Drew and John Polichronis

Global Business and Economics Review, 2005, vol. 7, issue 2/3, 155-179

Abstract: In this trading strategy study, we ask three questions: does momentum exist in foreign exchange markets? What is the impact of transaction costs on excess returns? Can a consolidated trading signal garner excess returns and if so, what is the source of such returns? Using total return momentum strategies in the foreign exchange markets of the G7 for the period 1980 through 2004, the answers from this study are as follows: we find evidence of momentum; however, such momentum appears transitory, particularly for longer lookback periods. As expected, transaction costs have a material negative impact on excess returns. Finally, a consolidated signal garners excess returns; however, a bootstrap simulation finds that the source of these returns is a function of autocorrelation.

Keywords: foreign exchange markets; total return momentum; trading rules; trading strategy; G7; transaction costs; excess returns; consolidated trading signals. (search for similar items in EconPapers)
Date: 2005
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.inderscience.com/link.php?id=7613 (text/html)
Access to full text is restricted to subscribers.

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:ids:gbusec:v:7:y:2005:i:2/3:p:155-179

Access Statistics for this article

More articles in Global Business and Economics Review from Inderscience Enterprises Ltd
Bibliographic data for series maintained by Sarah Parker ().