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A simple test of momentum in foreign exchange markets

Andres Felipe García-Suaza () and José E. Gómez González ()
Authors registered in the RePEc Author Service: Jose Eduardo Gomez-Gonzalez () and Andres Garcia-Suaza ()

Documentos de Trabajo from Universidad del Rosario

Abstract: This study proposes a new method for testing for the presence of momentum in nominal exchange rates, using a probabilistic approach. We illustrate our methodology estimating a binary response model using information on local currency / US dollar exchange rates of eight emerging economies. After controlling for important variables a§ecting the behavior of exchange rates in the short-run, we show evidence of exchange rate inertia; in other words, we Önd that exchange rate momentum is a common feature in this group of emerging economies, and thus foreign exchange traders participating in these markets are able to make excess returns by following technical analysis strategies. We Önd that the presence of momentum is asymmetric, being stronger in moments of currency depreciation than of appreciation. This behavior may be associated with central bank intervention.

Keywords: Momentum; foreign exchange markets; hazard duration analysis; emerging economies. (search for similar items in EconPapers)
JEL-codes: C41 G14 G15 (search for similar items in EconPapers)
Pages: 15
Date: 2011-03-13
New Economics Papers: this item is included in nep-cba
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http://repository.urosario.edu.co/bitstream/handle/10336/10984/8170.pdf

Related works:
Journal Article: A Simple Test of Momentum in Foreign Exchange Markets (2012) Downloads
Working Paper: A Simple Test of Momentum in Foreign Exchange Markets (2011) Downloads
Working Paper: A Simple Test of Momentum in Foreign Exchange Markets (2011) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:col:000092:008170

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