Abstract

http://ssrn.com/abstract=1994317
 
 

References (37)



 


 



Technical Trading, Predictability and Learning in Currency Markets


Valerio Potì


University College Dublin (UCD) - School of Business; Catholic University S.C. Piacenza

Richard M. Levich


New York University - Stern School of Business; National Bureau of Economic Research (NBER)

Pierpaolo Pattitoni


University of Bologna - Department of Management; University of Bologna - Rimini Center for Economic Analysis (RCEA)

January 2012

NYU Working Paper No. 2451/31452

Abstract:     
This paper studies predictability of currency returns over time and the extent to which it is captured by trading rules commonly used in currency markets. We consider the strategies that an investor endowed with rational expectations could have pursued to exploit out-of-sample currency predictability and generate abnormal returns. We find a close relation between these strategies and indices that track popular technical trading rules, namely moving average cross-over rules and the carry trade, implying that the technical rules represent heuristics by which professional market participants exploit currency mispricing. We find evidence that such mispricing reflects initially wrong investors’ beliefs (wrong priors), but information is efficiently processed as it becomes available. Predictability is highest in the mid ’90, subsequently decreases sharply, but increases again in the final part of the sample period, especially for the Euro and other emerging currencies.

Number of Pages in PDF File: 45

working papers series





Download This Paper

Date posted: January 28, 2012 ; Last revised: September 10, 2013

Suggested Citation

Potì, Valerio and Levich, Richard M. and Pattitoni, Pierpaolo, Technical Trading, Predictability and Learning in Currency Markets (January 2012). NYU Working Paper No. 2451/31452. Available at SSRN: http://ssrn.com/abstract=1994317

Contact Information

Valerio Potì
University College Dublin (UCD) - School of Business ( email )
Ireland
Catholic University S.C. Piacenza ( email )
Via Emilia Parmense, 84
Piacenza
United States
HOME PAGE: http://docenti.unicatt.it/ita/valerio_poti/
Richard M. Levich (Contact Author)
New York University - Stern School of Business ( email )
Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
212-998-0422 (Phone)
212-995-4256 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Pierpaolo Pattitoni
University of Bologna - Department of Management ( email )
Via Capo di Lucca, 34
Bologna, 40126
Italy
University of Bologna - Rimini Center for Economic Analysis (RCEA) ( email )
Via Patara, 3
Rimini (RN), RN 47900
Italy
Feedback to SSRN


Paper statistics
Abstract Views: 1,573
Downloads: 533
Download Rank: 28,395
References:  37

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo2 in 0.562 seconds