The Economic Value of Fundamental and Technical Information in Emerging Currency Markets

45 Pages Posted: 29 Jan 2008 Last revised: 19 Oct 2010

See all articles by Thijs D. Markwat

Thijs D. Markwat

Robeco Asset Management

Dick J. C. van Dijk

Erasmus University Rotterdam - Erasmus School of Economics - Econometric Institute; ERIM

Laurens Swinkels

Erasmus University Rotterdam (EUR); Robeco Quantitative Investments

Gerben J. de Zwart

APG Asset Management

Date Written: 21 2007, 12

Abstract

We measure the economic value of information derived from macroeconomic variables and from technical trading rules for emerging markets currency investments. Our analysis is based on a sample of 21 emerging markets with a floating exchange rate regime over the period 1997-2007 and explicitly accounts for trading restrictions on foreign capital movements by using non-deliverable forward data. We document that both types of information can be exploited to implement profitable trading strategies. In line with evidence from surveys of foreign exchange professionals concerning the use of fundamental and technical analysis, we find that combining the two types of information improves the risk-adjusted performance of the investment strategies.

Keywords: emerging markets, foreign exchange rates, structural exchange rate models, technical trading, heterogeneous agents

JEL Classification: G3, M, E43

Suggested Citation

Markwat, Thijs Dingeman and van Dijk, Dick J.C. and Swinkels, Laurens and de Zwart, Gerben J., The Economic Value of Fundamental and Technical Information in Emerging Currency Markets (21 2007, 12). ERIM Report Series Reference No. ERS-2007-096-F&A, Available at SSRN: https://ssrn.com/abstract=1088222

Thijs Dingeman Markwat

Robeco Asset Management ( email )

Weena 850
3014 DA
Rotterdam
Netherlands

Dick J.C. Van Dijk

Erasmus University Rotterdam - Erasmus School of Economics - Econometric Institute

P.O. Box 1738
3000 DR Rotterdam
Netherlands

ERIM ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands
+31 10 408 1263 (Phone)
+31 10 4089162 (Fax)

HOME PAGE: http://people.few.eur.nl/djvandijk

Laurens Swinkels

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

Robeco Quantitative Investments ( email )

Rotterdam, 3000
Netherlands
+31 10 224 2470 (Phone)
+31 10 224 2110 (Fax)

Gerben J. De Zwart (Contact Author)

APG Asset Management ( email )

P.O. Box 75283
Amsterdam, 1070 AG
Netherlands
+31-20-6048182 (Phone)

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