Is Technical Analysis in the Foreign Exchange Market Profitable? A Genetic Programming Approach
AbstractWe use genetic programming techniques to identify optimal technical trading rules. We find strong evidence of economically significant out-of-sample excess returns to the rules for each of six exchange rates ($/DM, $/Yen, $/SF, $/Â£, DM/Yen, SF/Â£), over the period 1981â95. Some of the rules have a structure similar to those used by technical analysts. 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. âBootstrappingâ results for the $/DM indicate that the trading rules are detecting patterns in the data that are not captured by standard statistical models.
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Bibliographic InfoArticle provided by Cambridge University Press in its journal Journal of Financial and Quantitative Analysis.
Volume (Year): 32 (1997)
Issue (Month): 04 (December)
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Other versions of this item:
- Christopher J. Neely & Paul A. Weller & Robert Dittmar, 1997. "Is technical analysis in the foreign exchange market profitable? a genetic programming approach," Working Papers 1996-006, Federal Reserve Bank of St. Louis.
- Dittmar, Robert & Neely, Christopher J & Weller, Paul, 1996. "Is Technical Analysis in the Foreign Exchange Market Profitable? A Genetic Programming Approach," CEPR Discussion Papers 1480, C.E.P.R. Discussion Papers.
- F31 - International Economics - - International Finance - - - Foreign Exchange
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
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