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Technical Analysis and Stochastic Properties of Exchange Rate Movements: Empirical Evidence from the Romanian Currency Market

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  • Todea, Alexandru

    ()
    (Faculty of Economics and Business Administration, Babes-Bolyai University)

  • Zoicas Ienciu, Adrian

    ()
    (Faculty of Economics and Business Administration, Babes-Bolyai University)

Abstract

Romanian currency market considering the episodic character of linear and/or nonlinear dependencies, between 1999 and 2008. The main conclusion is that profitability of moving average strategies is not constant over time and that is mainly due to linear and nonlinear episodic dependencies. The trading rule profits did not declined over time in the case of the Romanian currency market. Exploring the causes of profitability, it was found that it was closely related to the intensity of manifestation of episodic linear and nonlinear dependencies, the state of the market, and it was not the result of a time varying risk premium. The empirical results are consistent with the Adaptive Markets Hypothesis (Lo, 2004), but not with the Efficient Market Hypothesis.

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Bibliographic Info

Article provided by Institute for Economic Forecasting in its journal Romanian Journal for Economic Forecasting.

Volume (Year): (2011)
Issue (Month): 1 (March)
Pages: 175-192

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Handle: RePEc:rjr:romjef:v::y:2011:i:1:p:175-192

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Related research

Keywords: technical analysis; exchange rate; random walk; episodic dependencies; bicorrelation test;

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Cited by:
  1. Dan Anghel, 2013. "How Reliable is the Moving Average Crossover Rule for an Investor on the Romanian Stock Market?," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 5(2), pages 089-115, December.

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