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Is there momentum or reversal in weekly currency returns?

Listed author(s):
  • Raza, Ahmad
  • Marshall, Ben R.
  • Visaltanachoti, Nuttawat

We investigate whether momentum or reversal is the dominant phenomenon in short horizon (one- to four-week) foreign exchange rate returns. We find, based on a broad sample of 63 emerging and developed market currencies, evidence of momentum rather than reversal. Momentum strategy returns are as large as 8% p.a. The short-term momentum effect appears to be robust. Returns are larger in the earlier sub-period but still exist in the more recent period. The strategies are also profitable when the USD is appreciating or depreciating but they perform better in business cycle expansions.

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File URL: http://www.sciencedirect.com/science/article/pii/S0261560614000400
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Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 45 (2014)
Issue (Month): C ()
Pages: 38-60

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Handle: RePEc:eee:jimfin:v:45:y:2014:i:c:p:38-60
DOI: 10.1016/j.jimonfin.2014.02.009
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30443

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