Using genetic programming techniques to find technical trading rules, we find strong evidence of economically significant out-of-sample excess returns to those rules for each of six exchange rates, over the period 1981-1995. Further, when the dollar/deutschemark rules are allowed to determine trades in the other markets, there is a significant improvement in performance in all cases, except for the deutschemark/yen. 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 on the dollar/deutschemark indicate that the trading rules are detecting patterns in the data that are not captured by standard statistical models.
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Publisher Info
Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number
1996-006.
Length: Date of creation: 1997 Date of revision: Publication status: Published in Journal of Financial and Quantitative Analysis, December 1997 Handle: RePEc:fip:fedlwp:1996-006
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