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Illusory Profitability of Technical Analysis in Emerging Foreign Exchange Markets

Pei Kuang (), Michael Schröder and Qingwei Wang

Discussion Papers from Department of Economics, University of Birmingham

Abstract: We conduct an extensive examination of profitability of technical analysis in ten emerging foreign exchange markets. Studying 25988 trading strategies for emerging foreign exchange markets, we find that best rules can sometimes generate an annually mean excess return of more than 30%. Based on standard tests, we find hundreds to thousands of seemingly significant profitable strategies. Almost all these profits vanish once the data snooping bias is taken into account. Overall, we show that the profitability of technical analysis is illusory.

Keywords: foreign exchange; technical trading; data mining; bootstrap test; emerging market (search for similar items in EconPapers)
JEL-codes: C12 F31 G14 G15 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2013-03
New Economics Papers: this item is included in nep-mst
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Related works:
Journal Article: Illusory profitability of technical analysis in emerging foreign exchange markets (2014) Downloads
Working Paper: Illusory Profitability of Technical Analysis in Emerging Foreign Exchange Markets (2013) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:bir:birmec:13-09

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