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A Simple Test of Momentum in Foreign Exchange Markets

  • José Eduardo Gómez-González
  • Andrés F. García-Suaza

This study proposes a new method for testing for the presence of momentum in nominal exchange rates, using a probabilistic approach. Using data for eight emerging economies, we show evidence of exchange rate inertia; however, the presence of momentum is asymmetric, being stronger in moments of currency depreciation than in moments of appreciation. This behavior may be associated with central bank intervention.

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Article provided by M.E. Sharpe, Inc. in its journal Emerging Markets Finance and Trade.

Volume (Year): 48 (2012)
Issue (Month): 5 (September)
Pages: 66-77

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Handle: RePEc:mes:emfitr:v:48:y:2012:i:5:p:66-77
Contact details of provider: Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=111024

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  16. Okunev, John & White, Derek, 2003. "Do Momentum-Based Strategies Still Work in Foreign Currency Markets?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 38(02), pages 425-447, June.
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