Forty Years, Thirty Currencies and 21,000 Trading Rules: A Large-scale, Data-Snooping Robust Analysis of Technical Trading in t

Mark Taylor and Po-Hsuan Hsu

No 10018, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We carry out a large-scale investigation of technical trading rules in the foreign exchange market, using daily data over a maximum of forty years for thirty developed and emerging market currencies. Employing a stepwise test to safeguard against data-snooping bias and examining over 21,000 technical trading rules, we find evidence of substantial predictability in both developed and emerging markets, measured against a variety of returns and risk-adjusted performance metrics. We present time-series and cross-sectional variation in sub-periods and cultural and/or geographic groups, respectively, suggesting that temporarily not-fully-rational behavior and market immaturity lead to technical predictability and potential profitability.

Keywords: Data-snooping bias; Foreign exchange; Technical analysis; Trading rules (search for similar items in EconPapers)
JEL-codes: C53 F31 G15 (search for similar items in EconPapers)
Date: 2014-06
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