Is technical analysis in the foreign exchange market profitable? a genetic programming approach
AbstractUsing genetic programming techniques to find technical trading rules, we find strong evidence of economically significant out-of-sample excess returns to those rules for each of six exchange rates, over the period 1981-1995. Further, when the dollar/deutschemark rules are allowed to determine trades in the other markets, there is a significant improvement in performance in all cases, except for the deutschemark/yen. Betas calculated for the returns according to various benchmark portfolios provide no evidence that the returns to these rules are compensation for bearing systematic risk. Bootstrapping results on the dollar/deutschemark indicate that the trading rules are detecting patterns in the data that are not captured by standard statistical models.
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Bibliographic InfoPaper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 1996-006.
Date of creation: 1997
Date of revision:
Publication status: Published in Journal of Financial and Quantitative Analysis, December 1997
Other versions of this item:
- Neely, Christopher & Weller, Paul & Dittmar, Rob, 1997. "Is Technical Analysis in the Foreign Exchange Market Profitable? A Genetic Programming Approach," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 32(04), pages 405-426, December.
- Dittmar, Robert & Neely, Christopher J & Weller, Paul, 1996. "Is Technical Analysis in the Foreign Exchange Market Profitable? A Genetic Programming Approach," CEPR Discussion Papers 1480, C.E.P.R. Discussion Papers.
- F31 - International Economics - - International Finance - - - Foreign Exchange
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
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