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Forty Years, Thirty Currencies and 21,000 Trading Rules: A Large-scale, Data-Snooping Robust Analysis of Technical Trading in the Foreign Exchange Market

Listed author(s):
  • Hsu, Po-Hsuan
  • Taylor, Mark P

We carry out a large-scale investigation of technical trading rules in the foreign exchange market, using daily data over a maximum of forty years for thirty developed and emerging market currencies. Employing a stepwise test to safeguard against data-snooping bias and examining over 21,000 technical trading rules, we find evidence of substantial predictability in both developed and emerging markets, measured against a variety of returns and risk-adjusted performance metrics. We present time-series and cross-sectional variation in sub-periods and cultural and/or geographic groups, respectively, suggesting that temporarily not-fully-rational behavior and market immaturity lead to technical predictability and potential profitability.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 10018.

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Date of creation: Jun 2014
Handle: RePEc:cpr:ceprdp:10018
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