IDEAS home Printed from https://ideas.repec.org/a/eme/jespps/jes-11-2019-0503.html
   My bibliography  Save this article

Daily abnormal price changes and trading strategies in the FOREX

Author

Listed:
  • Guglielmo Maria Caporale
  • Alex Plastun

Abstract

Purpose - This paper explores abnormal price changes in the FOREX by using both daily and intraday data on the EURUSD, USDJPY, USDCAD, AUDUSD and EURJPY exchange rates over the period 01.01.2008–31.12.2018. Design/methodology/approach - It applies a dynamic trigger approach to detect abnormal price changes and then various statistical methods, including cumulative abnormal returns analysis, to test the following hypotheses: the intraday behaviour of hourly returns on overreaction days is different from that on normal days (H1), there are detectable patterns in intraday price dynamics on days with abnormal price changes (H2) and on the following days (H3). Findings - The results suggest that there are statistically significant differences between intraday dynamics on days with abnormal price changes and normal days respectively; also, prices tend to change in the direction of the abnormal change during that day, but move in the opposite direction on the following day. Finally, there exist trading strategies that generate abnormal profits by exploiting the detected anomalies, which can be seen as evidence of market inefficiency. Originality/value - New evidence on abnormal price changes and related trading strategies in the FOREX.

Suggested Citation

  • Guglielmo Maria Caporale & Alex Plastun, 2020. "Daily abnormal price changes and trading strategies in the FOREX," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 48(1), pages 211-222, September.
    • Handle: RePEc:eme:jespps:jes-11-2019-0503
    DOI: 10.1108/JES-11-2019-0503
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/JES-11-2019-0503/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: no
    File URL: https://www.emerald.com/insight/content/doi/10.1108/JES-11-2019-0503/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: no
    File URL: https://libkey.io/10.1108/JES-11-2019-0503?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Keywords

    FOREX; Anomalies; Overreactions; Abnormal returns; Patterns; Abnormal price changes; C63; G12; G17;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:jespps:jes-11-2019-0503. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emerald Support (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.