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Profitability of technical trading rules in the Chinese yuan-based foreign exchange market

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  • Song, Shenyi
  • Chuang, O-Chia
  • Fu, Hsuan

Abstract

This study provides a comprehensive analysis of technical trading rules in the Chinese yuan-based foreign exchange market. Utilizing daily data spanning seven years for 14 developed and 10 emerging market currencies, we examine a universe of 41,660 trading rules, significantly expanding the scope of previous research. To address data-snooping bias, we employ the Step-SPA(k) tests, revealing excess profitability in at least half of the developed and emerging currencies, indicating heterogeneous market efficiency across currencies. To ensure the robustness of our findings, we conducted a series of checks, including the Step-SPA test for conservative data-snooping bias control, break-even transaction cost analysis to evaluate profitability under trading costs, out-of-sample performance evaluation to assess generalizability, and an examination of bank intervention effects to account for potential market distortions.

Suggested Citation

  • Song, Shenyi & Chuang, O-Chia & Fu, Hsuan, 2025. "Profitability of technical trading rules in the Chinese yuan-based foreign exchange market," Pacific-Basin Finance Journal, Elsevier, vol. 92(C).
    • Handle: RePEc:eee:pacfin:v:92:y:2025:i:c:s0927538x25001416
    DOI: 10.1016/j.pacfin.2025.102804
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    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • F3 - International Economics - - International Finance
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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