Direction Accuracy, Forecasting Error and the Profitability of Currency Trading: Simulation-Based Evidence - Accuratezza direzionale, errore previsionale e convenienza del currency trading: evidenze dalle simulazioni

Imad Moosa ()
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Imad Moosa: School of Economics, Finance and Marketing, RMIT, Postal: 239 Bourke Street Melbourne 3000 Victoria, Australia ,, http://www.rmit.edu.au/

Economia Internazionale / International Economics, 2014, vol. 67, issue 3, 413-423

Abstract: A simulation exercise is conducted to find out if the profitability of forecasting-based currency trading is more related to the ability of the underlying model to predict the direction of change than the magnitude of the forecasting error. Theoretical considerations show that a correct prediction of the direction of change is neither a necessary nor a sufficient condition for a profitable trade. The results of the simulation exercise indicate that profitability is more strongly correlated with direction accuracy than with the root mean square error. - In questo studio viene condotta una simulazione al fine di verificare se la convenienza del currency trading basato su modelli previsionali è maggiormente riferibile alla capacità del modello di prevedere la direzione del tasso di cambio o piuttosto alla portata dell’errore di previsione. Considerazioni teoriche mostrano che una previsione corretta della direzione non è condizione né necessaria né sufficiente affinché l’operazione sia conveniente. I risultati della simulazione evidenziano che tale convenienza è maggiormente correlata con l’accuratezza della direzione che con l’errore quadratico medio.

Keywords: Direction Accuracy; Forecasting; Currency Trading; Simulation (search for similar items in EconPapers)
JEL-codes: F31 F37 (search for similar items in EconPapers)
Date: 2014
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