Real-Time Trading Models and the Statistical Properties of Foreign Exchange Rates

Ramazan GenÁay, Giuseppe Ballocchi, Michel Dacorogna, Richard Olsen () and Olivier Pictet
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Ramazan GenÁay: University of Windsor, Canada
Giuseppe Ballocchi: Olsen & Associates, Switzerland
Olivier Pictet: Dynamic Asset Management, Switzerland
Authors registered in the RePEc Author Service: Ramazan Gencay

International Economic Review, 2002, vol. 43, issue 2, 463-492

Abstract: The contributions of this article are twofold. First, the performance of a widely used commercial real-time trading model is compared with the performance of systematic currency traders. Second, the real-time trading model is used to evaluate the statistical properties of foreign exchange rates. The out-of-sample test period is seven years of high-frequency data for four major rates. The trading model yields positive annualized returns (net of transaction costs) in all cases. The null hypothesis of whether the real-time performances of the foreign exchange series are consistent with traditional statistical processes is tested under the probability distributions of the performance measures. Copyright Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association

Date: 2002
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