Technical analysis and central bank intervention
AbstractThis paper extends the genetic programming techniques developed in Neely, Weller and Dittmar (1997) to show that technical trading rules can make use of information about U.S. foreign exchange intervention to improve their out-of-sample profitability for two of four exchange rates. Rules tend to take positions contrary to official intervention and are unusually profitable on days prior to intervention, indicating that intervention is intended to check or reverse predictable trends. Intervention seems to be more successful in checking predictable trends in the out-of-sample (1981-1996) period than in the in-sample (1975-1980) period. We conjecture that this instability in the intervention process prevents more consistent improvement in the excess returns to rules. We find that the improvement in performance results solely from more efficient use of the information in the past exchange rate series rather than from information about contemporaneous intervention.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of International Money and Finance.
Volume (Year): 20 (2001)
Issue (Month): 7 (December)
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Web page: http://www.elsevier.com/locate/inca/30443
Other versions of this item:
- Christopher Neely & Paul Weller, 2000. "Technical analysis and central bank intervention," Working Papers 1997-002, Federal Reserve Bank of St. Louis.
- Paul Weller & Christopher Neely, 1999. "Technical Analysis and Central Bank Intervention," Working Papers wp99-04, Warwick Business School, Finance Group.
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.:
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- Levich, Richard M. & Thomas, Lee III, 1993. "The significance of technical trading-rule profits in the foreign exchange market: a bootstrap approach," Journal of International Money and Finance, Elsevier, vol. 12(5), pages 451-474, October.
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1996-006, Federal Reserve Bank of St. Louis.
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- repec:fth:pennfi:70 is not listed on IDEAS
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