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Abstract

: This work presents a review of the main indicators used in the technical analysis of the peso-dollar parity. We explain the interpretations carried out by technical analysts of these indicators and perform forecasting analysis of the Relative Strength Index (RSI) to predict exchange rate returns at daily frequency. The predictive exercises are done using both in-sample and out-of-sample techniques, and report a robust forecasting ability for horizons within 7 weeks.

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Bibliographic Info

Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 425.

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Date of creation: Aug 2007
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Handle: RePEc:chb:bcchwp:425

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1. Martin D. D. Evans and Richard K. Lyons., 1999. "Order Flow and Exchange Rate Dynamics," Research Program in Finance Working Papers RPF-288, University of California at Berkeley.
   
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   • Evans, Martin D. & Lyons, Richard K., 1999. "Order Flow and Exchange Rate Dynamics," Research Program in Finance, Working Paper Series qt0dh1c16w, Research Program in Finance, Institute for Business and Economic Research, UC Berkeley.
   • Martin D.D. Evans & Richard K. Lyons, 1999. "Order Flow and Exchange Rate Dynamics," NBER Working Papers 7317, National Bureau of Economic Research, Inc.
2. Todd E. Clark, 2000. "Can out-of-sample forecast comparisons help prevent overfitting?," Research Working Paper RWP 00-05, Federal Reserve Bank of Kansas City.
   
   • Todd E. Clark, 2004. "Can out-of-sample forecast comparisons help prevent overfitting?," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 23(2), pages 115-139.
3. repec:att:wimass:9220 is not listed on IDEAS
4. Lutz Kilian & Atsushi Inoue, 2002. "In-Sample or out-of-sample tests of predictability: which one should we use?," Working Paper Series 195, European Central Bank.
   
   • Atsushi Inoue & Lutz Kilian, 2005. "In-Sample or Out-of-Sample Tests of Predictability: Which One Should We Use?," Econometric Reviews, Taylor and Francis Journals, vol. 23(4), pages 371-402.
   • Inoue, Atsushi & Kilian, Lutz, 2002. "In-Sample or Out-of-Sample Tests of Predictability: Which One Should We Use?," CEPR Discussion Papers 3671, C.E.P.R. Discussion Papers.
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6. Pablo Pincheira, 2006. "Shrinkage Based Tests of the Martingale Difference Hypothesis," Working Papers Central Bank of Chile 376, Central Bank of Chile.
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13. Newey, Whitney K & West, Kenneth D, 1994. "Automatic Lag Selection in Covariance Matrix Estimation," Review of Economic Studies, Wiley Blackwell, vol. 61(4), pages 631-53, October.
    
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14. McCracken, Michael W., 2007. "Asymptotics for out of sample tests of Granger causality," Journal of Econometrics, Elsevier, vol. 140(2), pages 719-752, October.
15. Lee, Chun I & Gleason, Kimberly C. & Mathur, Ike, 2001. "Trading rule profits in Latin American currency spot rates," International Review of Financial Analysis, Elsevier, vol. 10(2), pages 135-156.
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Cited by:

1. Pablo Pincheira B., 2007. "Hidden Predictability in Economics: The Case of the Chilean Exchange Rate," Working Papers Central Bank of Chile 435, Central Bank of Chile.
2. Eduardo López E. & Ercio Muñoz S. & Víctor Riquelme P., 2011. "Una Evaluación de los Modelos de Proyección del Precio del Cobre: ¿Podemos ir Más Allá de la Autorregresión?," Notas de Investigación Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 14(3), pages 83-96, December.
3. Pablo Pincheira B., 2008. "Predictibilidad Encubierta en Economía: El Caso del Tipo de Cambio Nominal Chileno," Notas de Investigación Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 11(1), pages 137-142, April.
4. Rodrigo Caputo G. & Marco Núñez N. & Rodrigo O. Valdés P., 2008. "Exchange Rate Analysis in Practice," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 11(1), pages 61-91, April.
   
   • Rodrigo Caputo & Marco Núñez & Rodrigo Valdés, 2007. "Exchange Rate Analysis in Practice," Working Papers Central Bank of Chile 434, Central Bank of Chile.

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