Is Technical Analysis in the Foreign Exchange Market Profitable? A Genetic Programming Approach

Robert Dittmar, Christopher Neely and Paul Weller

No 1480, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We use genetic programming techniques to identify optimal technical trading rules. We find strong evidence of economically significant out-of-sample excess returns to the rules for each of six exchange rates ($/DM, $/Yen, $/SF, $/£, DM/Yen, SF/£), over the period 1981–95. Some of the rules have a structure similar to those used by technical analysts. Betas calculated for the returns according to various benchmark portfolios provide no evidence that the returns to these rules are compensation for bearing systematic risk. ‘Bootstrapping’ results for the $/DM indicate that the trading rules are detecting patterns in the data that are not captured by standard statistical models.

Keywords: Exchange Rates; Genetic Programming; Technical Trading Rules (search for similar items in EconPapers)
JEL-codes: F31 G15 (search for similar items in EconPapers)
Date: 1996-09
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Citations: View citations in EconPapers (45)

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Journal Article: Is Technical Analysis in the Foreign Exchange Market Profitable? A Genetic Programming Approach (1997)
Working Paper: Is technical analysis in the foreign exchange market profitable? a genetic programming approach (1997)
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