Do Momentum-Based Strategies Still Work in Foreign Currency Markets?
This paper examines the performance of momentum trading strategies in foreign exchange markets. We find the well-documented profitability of momentum strategies during the 1970s and the 1980s has continued throughout the 1990s. Our approach and findings are insensitive to the specification of the trading rule and the base currency for analysis. Finally, we show that the performance is not due to a time-varying risk premium but rather depends on the underlying autocorrelation structure of the currency returns. In sum, the results lend further support to prior momentum studies on equities. The profitability to momentum-based strategies holds for currencies as well.
Volume (Year): 38 (2003)
Issue (Month): 02 (June)
|Contact details of provider:|| Postal: Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK|
Web page: http://journals.cambridge.org/jid_JFQ
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Frankel, Jeffrey A & Froot, Kenneth A, 1990. "Chartists, Fundamentalists, and Trading in the Foreign Exchange Market," American Economic Review, American Economic Association, vol. 80(2), pages 181-85, May.
- Christopher J. Neely & Paul A. Weller, 2001.
"Intraday technical trading in the foreign exchange market,"
1999-016, Federal Reserve Bank of St. Louis.
- Neely, C. J. & Weller, P. A., 2003. "Intraday technical trading in the foreign exchange market," Journal of International Money and Finance, Elsevier, vol. 22(2), pages 223-237, April.
- Paul Weller & Christopher Neely, 1999. "Intraday Technical Trading in the Foreign Exchange Market," Working Papers wp99-02, Warwick Business School, Finance Group.
- Christopher J. Neely & Paul A. Weller & Robert Dittmar, 1997.
"Is technical analysis in the foreign exchange market profitable? a genetic programming approach,"
1996-006, Federal Reserve Bank of St. Louis.
- 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.
- Paul Weller & Christopher Neely, 1999.
"Technical Analysis and Central Bank Intervention,"
wp99-04, Warwick Business School, Finance Group.
- Christopher J. Neely, 2002.
"The temporal pattern of trading rule returns and central bank intervention: intervention does not generate technical trading rule profits,"
2000-018, Federal Reserve Bank of St. Louis.
- Neely, Christopher J., 2002. "The temporal pattern of trading rule returns and exchange rate intervention: intervention does not generate technical trading profits," Journal of International Economics, Elsevier, vol. 58(1), pages 211-232, October.
- Christopher J. Neely, 1998. "Technical analysis and the profitability of U.S. foreign exchange intervention," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 3-17.
- Sweeney, Richard J., 1988. "Some New Filter Rule Tests: Methods and Results," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 23(03), pages 285-300, September.
- Stephan Schulmeister, 1988.
"Currency speculation and dollar fluctuations,"
BNL Quarterly Review,
Banca Nazionale del Lavoro, vol. 41(167), pages 343-365.
- Sweeney, Richard J., 1997. "Do central banks lose on foreign-exchange intervention? A review article," Journal of Banking & Finance, Elsevier, vol. 21(11-12), pages 1667-1684, December.
- Levich, Richard M, 1989. "Is the Foreign Exchange Market Efficient?," Oxford Review of Economic Policy, Oxford University Press, vol. 5(3), pages 40-60, Autumn.
When requesting a correction, please mention this item's handle: RePEc:cup:jfinqa:v:38:y:2003:i:02:p:425-447_00. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Keith Waters)
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.