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Technical Trading Rules and Regime Shifts in Foreign Exchange

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Author Info
Blake LeBaron () (University of Wisconsin - Madison)

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Abstract

This paper performs tests on several different foreign exchange series using a methodology inspired by technical trading rules. Moving average based rules are used as specification tests on the process for foreign exchange rates. Several models for regime shifts and persistent trends are simulated and compared with results from the actual series. The results show that these simple models can not capture some aspects of the series studied. Finally, the economic significance of the trading rule results are tested. Returns distributions from the trading rules are compared with returns on risk free assets and returns from the U.S. stock market.

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Paper provided by University of Wisconsin - Madison in its series Working papers with number _007.

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Handle: RePEc:wop:wimahp:_007

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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Bill Cai & Charlie Cai & Kevin Keasey, 2005. "Market Efficiency and Returns to Simple Technical Trading Rules: Further Evidence from U.S., U.K., Asian and Chinese Stock Markets," Asia-Pacific Financial Markets, Springer, vol. 12(1), pages 45-60, March. [Downloadable!] (restricted)
  2. Enrico Zaninotto, 1997. "Comitati volontari e standard de-iure," Quaderni DISA 003, Department of Computer and Management Sciences, University of Trento, Italy.
  3. Blake LeBaron, 1994. "Chaos and Nonlinear Forecastability in Economics and Finance," Finance 9411001, EconWPA. [Downloadable!]
  4. Blake LeBaron, 1994. "Technical Trading Rule Profitability and Foreign Exchange Intervention," International Finance 9411002, EconWPA. [Downloadable!]
    Other versions:
  5. Jing Yang, 1999. "Heterogeneous Beliefs, Intelligent Agents, and Allocative Efficiency in an Artificial Stock Market," Computing in Economics and Finance 1999 612, Society for Computational Economics. [Downloadable!]
  6. Shareen Joshi & Jeffrey Parker & Mark A. Bedau, 1998. "Technical Trading Creates a Prisoner's Dilemma: Results from an Agent-Based Model," Research in Economics 98-12-115e, Santa Fe Institute. [Downloadable!]
  7. Spyros Skouras, 1998. "Financial Returns and Efficiency as seen by an Artificial Technical Analyst," Finance 9808001, EconWPA, revised 24 Aug 1998. [Downloadable!]
    Other versions:
  8. P. Lequeux, E. Acar, 1998. "A dynamic index for managed currencies funds using CME currency contracts," European Journal of Finance, Taylor and Francis Journals, vol. 4(4), pages 311-330, December. [Downloadable!] (restricted)
  9. Hans Dewachter, 1997. "Sign predictions of exchange rate changes: Charts as proxies for Bayesian inferences," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 133(1), pages 39-55, March. [Downloadable!] (restricted)
  10. Emmanuel Acar, Stephen E. Satchell, 1997. "A theoretical analysis of trading rules: an application to the moving average case with Markovian returns," Applied Mathematical Finance, Taylor and Francis Journals, vol. 4(3), pages 165-180, September. [Downloadable!] (restricted)
  11. Ronald J. Balvers & Yangru Wu, 2005. "Optimal Transaction Filters Under Transitory Trading Opportunities: Theory and Empirical Illustration," Working Papers 022005, Hong Kong Institute for Monetary Research. [Downloadable!]
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  12. Bernd Lucke, 2003. "Are technical trading rules profitable? Evidence for head-and-shoulder rules," Applied Economics, Taylor and Francis Journals, vol. 35(1), pages 33-40, January. [Downloadable!] (restricted)
  13. Alessandro Beber, 1999. "Il dibattito su dignità ed efficacia dell'analisi tecnica nell'economia finanziaria," Alea Tech Reports 003, Department of Computer and Management Sciences, University of Trento, Italy, revised 14 Jun 2008. [Downloadable!]
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