Technical analysis in foreign exchange markets: evidence from the EMS

Abstract

This article assesses the economic significance of the non-linear predictability of EMS exchange rates. To that end, and using daily data for nine EMS currencies covering the 1 January 1978-31 December 1994 period, it considers nearest- neighbour non-linear predictors, transforming their forecasts into a technical trading rule, whose profitability has been evaluated against the traditional moving average trading rules, considering both interest rates and transaction costs. The results suggest that in most cases, a trading rule based on a non-linear predictor outperforms the moving average, both in terms of returns and in terms of the ideal profit and the Sharpe ratio profitability indicators.

An update on EMU sovereign yield spread drivers in times of crisis: A panel data analysis

“…Two groups of countries were differentiated: those that maintained broadly stable bilateral exchange rates against the Deutschmark, and those whose currencies either entered the ERM later or suspended its participation in the ERM, fluctuating in value to a great extent relative to the Deutschmark. Finally, the same two groups are found in Fernández-Rodríguez et al (1999) to have relevant information helping to improve the prediction of currencies in each group based on the behaviour of the rest of the currencies, information that can be used to generate simple trading rules that outperform the moving average trading rules widely used in the markets (see Fernández-Rodríguez et al., 2003). 18 We consider three basic panel regression methods: the fixed-effects (FE) method, the random effects (RE) model and the pooled-OLS method.…”

What Do We Know About the Profitability of Technical Analysis?

“…They also demonstrate that eliminating US intervention days decreases net returns substantially, to −10% and −28% for the mark and yen, respectively. Fernández‐Rodríguez et al . (2003) find that trading rules based on the nearest neighbour model are superior to moving average rules in European exchange markets for 1978–1994.…”

Profitability of The Moving Averages Technical Trading Rules in an Emerging Stock Market-A Study of Individual Stocks Listed On Pakistan Stock Exchange

“…As emerged from its farsighted point of confinement concerning unsteadiness composed portfolios, MA timing strategy shows the fragile keen breaking point as for solitary stocks and thus neglects to persuade steady higher returns to buy and hold approach. In any case, the eventual outcomes of our examinations are steady with (Coakley et al, 2016) and (Fernández-Rodríguez et al, 2003) disclosures of moving average farsighted farthest point in real money markets. In the context of our disclosures, we can argue that individual stock returns are noisier than portfolio stock returns; our finding can be utilized to conduct more future studies of technical trading rules in predicting stock returns.…”

“…Coakley et al (2016) analyzed that twenty-two monetary standards cited in USD over a time of 1996 to 2015, they extract direct exchange rules comprising of moving average and difficult exchanging rules such as Bollinger groups and related strength index as gainfulness yet later vigor test for information snooping inclination simply difficult exchanging rules like relative strength index and Bollinger band are productive especially in 10 years prior of the sample time allotment from 2006-2015 appearing towards increase in market proficiency. Similarly, Fernández-Rodríguez et al (2003) broke down the benefits changed by using nearest neighbor non-straight pointers with MA and found that later give less gainful results inside seeing trading price and interest rate.…”