Success and Failure of Technical Trading Strategies in the Cocoa Futures Market

H. Peter Boswijk (), Gerwin Griffioen () and Cars Hommes
Additional contact information
Gerwin Griffioen: University of Amsterdam

No 01-016/1, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: A large set of 5350 trend following technica! trading rules is applied to LIFFEand CSCE cocoa futures prices, and tothe Pound-Dollar exchange rate, in the period 1983:1-1997:6. We find that 72% ofthe trading rules generatespositive profits, even when correcting for transaction and borrowing costs, whenapplied to the LIFFE cocoa futuresprices. Moreover, a large set of trading rules exhibits statisticallysignificant forecasting power of the LIFFE cocoafutures series. On the other hand the same set of strategies performs poor onthe CSCE cocoa futures prices, withonly 18% generating positive net profits and hardly any statisticallysignificant forecasting power. The largedifference in the performance of technical trading may be attributed to acombination of the demand/supplymechanism in the cocoa market and an accident al influence of the Pound- Dollarexchange rate, reinforcing trendsin the LIFFE cocoa futures but weakening trends in the CSCE cocoa futures. Ourcase-study suggests a connectionbetween the succes or failure of technical trading and the relative magnitudes of trend and volatility of the underlying series. See also chapter 3 'Success and failure of technical analysis in the cocoa futures market' in (C. Kyrtsou & C. Vorlow (Eds.)), Progress in financial markets research (Financial institutions and services) (pp. 25-70). New York: Nova Science, 2012.

Keywords: technical trading strategies; commodity futures; exchange rate (search for similar items in EconPapers)
Date: 2001-02-06
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://papers.tinbergen.nl/01016.pdf (application/pdf)

Related works:
Working Paper: Success and Failure of Technical Trading Strategies in the Cocoa Futures Market (2001)
Working Paper: Succes and Failure of Technical Trading Strategies in the Cocoa Futures Market (2001)
Working Paper: Succes and Failure of Technical Trading Strategies in the Cocoa Futures Markets (2000)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20010016

Access Statistics for this paper

More papers in Tinbergen Institute Discussion Papers from Tinbergen Institute Contact information at EDIRC.
Bibliographic data for series maintained by Tinbergen Office +31 (0)10-4088900 ().