Do Moving Average Trading Rule Results Imply Nonlinearities in Foreign Exchange?
AbstractThis paper tests whether fitted linear models can replicate results from moment tests inspired by moving average technical trading rules for weekly foreign exchange series. Estimation is performed using standard OLS and maximum likelihood methods, along with a simulated method of moments technique which incorporates the trading rule moments into the estimation procedure. Results show that linear models are capable of replicating the trading rule moments along with the small autocorrelations observed in these series. This result holds for parameter values estimated using SMM and GARCH disturbances, but not for parameters estimated using maximum likelihood. The estimated models are simulated to examine the amount of predictability over long horizons.
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.
Bibliographic InfoPaper provided by University of Wisconsin - Madison in its series Working papers with number _005.
Date of creation:
Date of revision:
Contact details of provider:
Postal: Social Science Building, 1180 Observatory Drive, Madison, WI 53706-1393
Web page: http://www.econ.wisc.edu/
More information through EDIRC
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Dueker, Michael & Neely, Christopher J., 2007.
"Can Markov switching models predict excess foreign exchange returns?,"
Journal of Banking & Finance,
Elsevier, vol. 31(2), pages 279-296, February.
- Michael Dueker & Christopher J. Neely, 2006. "Can Markov switching models predict excess foreign exchange returns?," Working Papers 2001-021, Federal Reserve Bank of St. Louis.
- Bertrand Maillet & Thierry Michel, 2000. "Further insights on the puzzle of technical analysis profitability," The European Journal of Finance, Taylor & Francis Journals, vol. 6(2), pages 196-224.
- Alessandro Beber, 1999. "Il dibattito su dignità ed efficacia dell'analisi tecnica nell'economia finanziaria," Alea Tech Reports 003, Department of Computer and Management Sciences, University of Trento, Italy, revised 14 Jun 2008.
- Dewachter, H.D.R. & Lyrio, M., 2003.
"The Cost of Technical Trading Rules in the Forex Market: A Utility-based Evaluation,"
ERS-2003-052-F&A, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
- Dewachter, Hans & Lyrio, Marco, 2006. "The cost of technical trading rules in the Forex market: A utility-based evaluation," Journal of International Money and Finance, Elsevier, vol. 25(7), pages 1072-1089, November.
- Balvers, Ronald & Wu, Yangru, 2010.
"Optimal transaction filters under transitory trading opportunities: Theory and empirical illustration,"
Journal of Financial Markets,
Elsevier, vol. 13(1), pages 129-156, February.
- Ronald J. Balvers & Yangru Wu, 2005. "Optimal Transaction Filters Under Transitory Trading Opportunities: Theory and Empirical Illustration," Working Papers 022005, Hong Kong Institute for Monetary Research.
- P. Lequeux & E. Acar, 1998. "A dynamic index for managed currencies funds using CME currency contracts," The European Journal of Finance, Taylor & Francis Journals, vol. 4(4), pages 311-330.
- Emmanuel Acar & Stephen Satchell, 1997. "A theoretical analysis of trading rules: an application to the moving average case with Markovian returns," Applied Mathematical Finance, Taylor and Francis Journals, vol. 4(3), pages 165-180.
- Mark, Nelson C & Wu, Yangru, 1998.
"Rethinking Deviations from Uncovered Interest Parity: The Role of Covariance Risk and Noise,"
Royal Economic Society, vol. 108(451), pages 1686-1706, November.
- Nelson Mark & Yangru Wu, 1998. "Rethinking Deviations from Uncovered Interest Parity: The Role of Covariance Risk and Noise," Working Papers 98-05, Ohio State University, Department of Economics.
- Hans Dewachter & Marco Lyrio, 2002.
"The Economic Value of Technical Trading Rules: A Non-parametric Utility-based Approach,"
International Economics Working Papers Series
ces0203, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, International Economics.
- Hans Dewachter & Marco Lyrio, 2005. "The economic value of technical trading rules: a nonparametric utility-based approach," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 10(1), pages 41-62.
- Dewachter, Hans & Lyrio, M, 2002. "The economic value of technical trading rules: A nonparametric utility-based approach," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/121583, Katholieke Universiteit Leuven.
- Nelson C. Mark & Yangru Wu, 1996.
"Risk, Policy Rules, and Noise: Rethinking Deviations From Uncovered Interest Parity,"
014, Ohio State University, Department of Economics.
- Nelson C. Mark & Yangru Wu, 1997. "Risk, Policy Rules, and Noise: Rethinking Deviations from Uncovered Interest Parity," Tinbergen Institute Discussion Papers 97-041/2, Tinbergen Institute.
- Spyros Skouras, 1998.
"Financial Returns and Efficiency as seen by an Artificial Technical Analyst,"
9808001, EconWPA, revised 24 Aug 1998.
- Skouras, Spyros, 2001. "Financial returns and efficiency as seen by an artificial technical analyst," Journal of Economic Dynamics and Control, Elsevier, vol. 25(1-2), pages 213-244, January.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel).
If references are entirely missing, you can add them using this form.