Success and Failure of Technical Trading Strategies in the Cocoa Futures Market
A large set of 5350 trend following technical trading rules is applied to LIFFE and CSCE cocoa futures prices, and to the Pound-Dollar exchange rate, in the period 1983:1 - 1997:6. We find that 72% of the trading rules generate positive profits, even when correcting for transaction and borrowing costs, when applied to the LIFFE cocoa futures prices. Moreover, a large set of trading rules exhibits statistically significant forecasting power of the LIFFE cocoa futures series. On the other hand the same set of strategies performs poor on the CSCE cocoa futures prices, with only 18% generating positive net profits and hardly any statistically significant forecasting power. The large difference in the performance of technical trading may be attributed to a combination of the demand/supply mechanism in the cocoa market and an accidental influence of the Pound-Dollar exchange rate, reinforcing trends in the LIFFE cocoa futures but weakening trends in the CSCE cocoa futures. Our case study suggests a connection between the success and failure of technical trading and the relative magnitudes of trend and volatility of the underlying series.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||04 Jan 2001|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: + 31 20 525 52 58
Fax: + 31 20 525 52 83
Web page: http://www.fee.uva.nl/cendef/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:ams:cdws01:4a.4. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum)
If references are entirely missing, you can add them using this form.