The Temporal Pattern of Trading Rule Returns and Central Bank Intervention: Intervention Does Not Generate Technical Trading Rule Profits

Neely, Christopher J.

doi:10.2139/ssrn.243284

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The Temporal Pattern of Trading Rule Returns and Central Bank Intervention: Intervention Does Not Generate Technical Trading Rule Profits

FRB St. Louis Working Paper No. 2000-018C

38 Pages Posted: 6 Dec 2000

See all articles by Christopher J. Neely

Christopher J. Neely

Federal Reserve Bank of St. Louis - Research Division

Date Written: November 30, 2000

Abstract

This paper characterizes the temporal pattern of trading rule returns and official intervention for Australian, German, Swiss and U.S. data to investigate whether intervention generates technical trading rule profits. High frequency data show that abnormally high trading rule returns precede German, Swiss and U.S. intervention, disproving the hypothesis that intervention generates inefficiencies from which technical rules profit. Australian intervention precedes high trading rule returns, but trading/intervention patterns make it implausible that intervention actually generates those returns. Rather, intervention responds to exchange rate trends from which trading rules have recently profited.

Keywords: Technical analysis, trading rules, intervention, exchange rates

JEL Classification: G0, G14

Suggested Citation: Suggested Citation

Neely, Christopher J., The Temporal Pattern of Trading Rule Returns and Central Bank Intervention: Intervention Does Not Generate Technical Trading Rule Profits (November 30, 2000). FRB St. Louis Working Paper No. 2000-018C, Available at SSRN: https://ssrn.com/abstract=243284 or http://dx.doi.org/10.2139/ssrn.243284