The Profitability of Trading in the Foreign Exchange Market: Chartists, Fundamentalists, and Simpletons
AbstractThis paper examines the returns and ex post variability of returns associated with the investment strategies of three distinctive groups of hypothetical traders in the foreign exchange market: Chartists, Fundamentalists, and Simpletons. Each group consists of three heterogeneous traders and is distinguished by its use of a different information set for trading purposes. We compare the returns associated with these imperfect traders to those of a perfect trader. The analysis covers four bilateral dollar parities using quarterly data over the period 1974-94. We find that statistically speaking no particular group dominates the others in terms of profitability. With respect to variability, there are some statistically significant differences but no robust conclusions can be drawn. We also find that in terms of yield a random walk investment strategy is beaten for all four parities by a strategy that relies upon recent extrapolation. Copyright 1995 by Royal Economic Society.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Oxford University Press in its journal Oxford Economic Papers.
Volume (Year): 47 (1995)
Issue (Month): 3 (July)
Contact details of provider:
Postal: Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK
Fax: 01865 267 985
Web page: http://oep.oupjournals.org/
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Menkhoff, Lukas & Taylor, Mark P., 2006.
"The Obstinate Passion of Foreign Exchange Professionals : Technical Analysis,"
The Warwick Economics Research Paper Series (TWERPS)
769, University of Warwick, Department of Economics.
- Lukas Menkhoff & Mark P. Taylor, 2007. "The Obstinate Passion of Foreign Exchange Professionals: Technical Analysis," Journal of Economic Literature, American Economic Association, vol. 45(4), pages 936-972, December.
- Menkhoff, Lukas & Taylor, Mark P., 2006. "The Obstinate Passion of Foreign Exchange Professionals: Technical Analysis," Diskussionspapiere der Wirtschaftswissenschaftlichen FakultÃ¤t der Leibniz UniversitÃ¤t Hannover dp-352, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
- Rotheli, Tobias F., 2002. "Bandwagon effects and run patterns in exchange rates," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 12(2), pages 157-166, April.
- Leonardo Becchetti & Michele Bagella & Fabrizio Adriani, 2003.
"Observed and 'Fundamental' Price Earning Ratios: A Comparative Analysis of High-tech Stock Evaluation in the US and in Europe,"
CEIS Research Paper
34, Tor Vergata University, CEIS.
- Bagella, Michele & Becchetti, Leonardo & Adriani, Fabrizio, 2005. "Observed and "fundamental" price-earning ratios: A comparative analysis of high-tech stock evaluation in the US and in Europe," Journal of International Money and Finance, Elsevier, vol. 24(4), pages 549-581, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press) or (Christopher F. Baum).
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.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.