Forty Years, Thirty Currencies and 21,000 Trading Rules: A Large-Scale, Data-Snooping Robust Analysis of Technical Trading in the Foreign Exchange Market

61 Pages Posted: 31 Oct 2014

See all articles by Po-Hsuan Hsu

Po-Hsuan Hsu

National Tsing Hua University - Department of Quantitative Finance

Mark P. Taylor

Washington University in St. Louis - John M. Olin Business School; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: May 5, 2013

Abstract

We carry out a large-scale investigation of technical trading rules in the foreign exchange market, using daily data over a maximum of forty years for thirty developed and emerging market currencies. Employing a stepwise test to safeguard against data-snooping bias and examining over 21,000 technical trading rules, we find evidence of substantial predictability in both developed and emerging markets, measured against a variety of returns and risk-adjusted performance metrics. We present time-series and cross-sectional variation in sub-periods and cultural and/or geographic groups, respectively, suggesting that temporarily not-fully-rational behavior and market immaturity lead to technical predictability and potential profitability.

Keywords: Data snooping, Foreign exchange, Technical analysis

JEL Classification: F31, C53, G15

Suggested Citation

Hsu, Po-Hsuan and Taylor, Mark Peter, Forty Years, Thirty Currencies and 21,000 Trading Rules: A Large-Scale, Data-Snooping Robust Analysis of Technical Trading in the Foreign Exchange Market (May 5, 2013). Available at SSRN: https://ssrn.com/abstract=2517125 or http://dx.doi.org/10.2139/ssrn.2517125

Po-Hsuan Hsu (Contact Author)

National Tsing Hua University - Department of Quantitative Finance ( email )

101, Section 2, Kuang-Fu Road
Hsinchu, Taiwan 300
China

Mark Peter Taylor

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1156
St. Louis, MO 63130-4899
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Register to save articles to
your library

Register

Paper statistics

Downloads
359
Abstract Views
1,251
rank
81,169
PlumX Metrics