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Is Exchange Rate Trading Profitable?

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  • Narayan, Paresh Kumar
  • Mishra, Sagarika
  • Narayan, Seema
  • Thuraisamy, Kannan

Abstract

We test whether exchange rate trading is profitable in the emerging markets of Brazil, China, India, and South Africa. Using momentum trading strategies applied to high frequency data, we discover that: (a) momentum-based trading strategies lead to statistically significant profits from the currencies of all four emerging markets; (b) the South African Rand is generally the most profitable, followed by the Brazilian Real and the Indian Rupee; (c) profits are persistent during the day and are trading frequency dependent; and (d) during the period of the global financial crisis currency profits were maximised.

Suggested Citation

  • Narayan, Paresh Kumar & Mishra, Sagarika & Narayan, Seema & Thuraisamy, Kannan, 2015. "Is Exchange Rate Trading Profitable?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 38(C), pages 217-229.
    • Handle: RePEc:eee:intfin:v:38:y:2015:i:c:p:217-229
    DOI: 10.1016/j.intfin.2015.05.015
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    4. Hudson, Robert & McGroarty, Frank & Urquhart, Andrew, 2017. "Sampling frequency and the performance of different types of technical trading rules," Finance Research Letters, Elsevier, vol. 22(C), pages 136-139.
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    6. Xiaoye Jin, 2022. "Evaluating the predictive power of intraday technical trading in China's crude oil market," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 41(7), pages 1416-1432, November.
    7. Jin, Xiaoye, 2022. "Performance of intraday technical trading in China’s gold market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 76(C).
    8. Wang, Lu & Ma, Feng & Niu, Tianjiao & He, Chengting, 2020. "Crude oil and BRICS stock markets under extreme shocks: New evidence," Economic Modelling, Elsevier, vol. 86(C), pages 54-68.
    9. Urquhart, Andrew & Zhang, Hanxiong, 2019. "The performance of technical trading rules in Socially Responsible Investments," International Review of Economics & Finance, Elsevier, vol. 63(C), pages 397-411.
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    11. Kilic, Erdem, 2017. "Contagion effects of U.S. Dollar and Chinese Yuan in forward and spot foreign exchange markets," Economic Modelling, Elsevier, vol. 62(C), pages 51-67.
    12. Dockery, Everton & Todorov, Ivan, 2023. "Further evidence on the returns to technical trading rules: Insights from fourteen currencies," Journal of Multinational Financial Management, Elsevier, vol. 69(C).

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