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Providing Empirical Evidence from Forex Autotrading to Contradict the Efficient Market Hypothesis

In: New Challenges in Entrepreneurship and Finance

Author

Listed:
  • Antonio Alonso-González

    (Universidad Sergio Arboleda)

  • Marta Peris-Ortiz

    (Universitat Politecnica de Valencia)

  • Vicente Almenar-Llongo

    (Universidad Catolica de Valencia “San Vicente Martir”)

Abstract

In this paper, we compare results from an automated operational strategy (or autotrading robot) with results from other financial products. Our aim is to analyze the performance of this robot. To this end, we optimized and evaluated an autotrading robot based on differences in signals of moving average convergence divergence (MACD). We applied this technique to six major currency pairs (AUD/USD, EUR/USD, GBP/USD, USD/CAD, USD/CHF, and USD/JPY), for a time scale of 1 h. We performed the analysis for an optimization period (2001–2008) and testing period (2008 to late August 2011), obtaining satisfactory results for all currency pairs. In addition, to evaluate the autotrading robot’s performance, results for all currency pairs were compared with those of other homogeneous financial products, namely exchange-traded funds (ETFs). Returns from the autotrading robot for four currency pairs were considerably better than those generated by ETFs. Results from the autotrading robot were always positive for all currency pairs. In contrast, ETFs yielded negative returns in some cases. Findings also provide empirical evidence contradicting the efficient market hypothesis. This article therefore marks a contribution to research into entrepreneurship in financial markets.

Suggested Citation

  • Antonio Alonso-González & Marta Peris-Ortiz & Vicente Almenar-Llongo, 2015. "Providing Empirical Evidence from Forex Autotrading to Contradict the Efficient Market Hypothesis," Springer Books, in: Marta Peris-Ortiz & Jean-Michel Sahut (ed.), New Challenges in Entrepreneurship and Finance, edition 127, chapter 0, pages 71-85, Springer.
    • Handle: RePEc:spr:sprchp:978-3-319-08888-4_5
    DOI: 10.1007/978-3-319-08888-4_5
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