Further evidence on technical analysis and profitability of foreign exchange intervention
In this paper we present new evidence on the positive correlation Between returns from technical trading rules and periods of central bank intervention. To that end, we evaluate the profitability of a trading strategy based on nearest-neighbour (nonlinear) predictors, which may be viewed as a generalisation of graphical methods widely used in financial markets. We use daily data on the US Dollar/Deutsche mark and US Dollar/Japanese Yen covering the 1 February 1982-31 December 1996 period. Our results suggest that the exclusion of days of US intervention implies a substantial reduction in all profitability indicators (net returns, ideal profit measure, Sharpe ratio and directional forecast), being the reduction grater in the US Dollar-Deustchmark case than in the US Dollar-Japanese yen case.
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- Blake LeBaron, 1994.
"Technical Trading Rule Profitability and Foreign Exchange Intervention,"
- LeBaron, Blake, 1999. "Technical trading rule profitability and foreign exchange intervention," Journal of International Economics, Elsevier, vol. 49(1), pages 125-143, October.
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- Blake LeBaron, "undated". "Technical Trading Rule Profitability and Foreign Exchange Intervention," Working papers _002, University of Wisconsin - Madison.
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- Fernandez-Rodriguez, Fernando & Sosvilla-Rivero, Simon & Andrada-Felix, Julian, 1999.
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Elsevier, vol. 15(4), pages 383-392, October.
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- Fernandez-Rodriguez, Fernando & Sosvilla-Rivero, Simon, 1998. "Testing nonlinear forecastability in time series: Theory and evidence from the EMS," Economics Letters, Elsevier, vol. 59(1), pages 49-63, April.
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- Levich, Richard M. & Thomas, Lee III, 1993. "The significance of technical trading-rule profits in the foreign exchange market: a bootstrap approach," Journal of International Money and Finance, Elsevier, vol. 12(5), pages 451-474, October.
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