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Cross-market information spillover and the performance of technical trading in the foreign exchange market

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  • Yung-Ho Chang

    (Tunghai University)

Abstract

This study evaluates the effect of cross-market information spillover on the performance of popular variable-length moving averages (VMAs) for trading the daily exchange rates of New Taiwan Dollars to US Dollars (FXNTD/USD). Information incorporated in the Dow Jones Industrial Average (DJIA) and Taiwan Stock Index (TWSI) is introduced to study the effect. The results indicate that VMAs outperform the buy-and-hold strategy. Moreover, the information reflected in the DJIA and TWSI promotes the performance of VMAs. After correcting for data snooping bias, the DJIA is more informative than FXNTD/USD and the TWSI for VMAs.

Suggested Citation

  • Yung-Ho Chang, 2019. "Cross-market information spillover and the performance of technical trading in the foreign exchange market," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 43(2), pages 211-227, April.
    • Handle: RePEc:spr:jecfin:v:43:y:2019:i:2:d:10.1007_s12197-018-9440-3
    DOI: 10.1007/s12197-018-9440-3
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    More about this item

    Keywords

    technical trading; cross-market information spillover; foreign exchange rates; Superior Predictive Ability;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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