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Connecting equity and foreign exchange markets through the WM “Fix†: a trading strategy

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  • Arnav Sheth
  • Keisuke Teeple

Abstract

The authors;examine the relationship between equity and foreign exchange markets at and around the WM/Reuters benchmark exchange rate known as the “Fix†. Execution at the Fix is a service offered by brokers, provided they obtain the trade order before 16:00 GMT. In this paper, the authors show the connection between equities and foreign exchange markets via this window, they;leverage this connection using an algorithmic trading strategy and rank various statistical techniques used to make predictions for trading based on their investment results. The best technique produces an out-of-sample annual cumulative return of 4.02% and an annualized Sharpe ratio of 3.43. This strategy is for illustration only.

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Handle: RePEc:rsk:journ6:7469181
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