Real-Time Trading Models and the Statistical Properties of Foreign Exchange Rates

30 Pages Posted: 7 Feb 2003

See all articles by Ramazan Gencay

Ramazan Gencay

Simon Fraser University

Giuseppe Ballocchi

Pictet & Cie, Banquiers

Michel M. Dacorogna

DEAR-Consulting

Richard B. Olsen

Lykke Corp

Olivier V. Pictet

Pictet Asset Management

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Abstract

The contributions of this article are twofold. First, the performance of a widely used commercial real-time trading model is compared with the performance of systematic currency traders. Second, the real-time trading model is used to evaluate the statistical properties of foreign exchange rates. The out-of-sample test period is seven years of high-frequency data for four major rates. The trading model yields positive annualized returns (net of transaction costs) in all cases. The null hypothesis of whether the real-time performances of the foreign exchange series are consistent with traditional statistical processes is tested under the probability distributions of the performance measures.

Suggested Citation

Gencay, Ramazan and Ballocchi, Giuseppe and Dacorogna, Michel M. and Olsen, Richard B. and Pictet, Olivier V., Real-Time Trading Models and the Statistical Properties of Foreign Exchange Rates. International Economic Review, Vol. 43, No. 2, pp. 463-492, 2002. Available at SSRN: https://ssrn.com/abstract=312537

Ramazan Gencay (Contact Author)

Simon Fraser University ( email )

Department of Economics
8888 University Drive
Burnaby, British Columbia V5A 1S6
Canada

Giuseppe Ballocchi

Pictet & Cie, Banquiers

29, boulevard Georges-Favon
CH-1204 Geneve
United States

Michel M. Dacorogna

DEAR-Consulting ( email )

Scheuchzerstrasse 160
Zurich, 8057
Switzerland
+41795447327 (Phone)

Richard B. Olsen

Lykke Corp ( email )

Baarerstrasse 2
Zug, Zug 6300
Switzerland
41793368950 (Phone)

HOME PAGE: http://www.lykke.com

Olivier V. Pictet

Pictet Asset Management ( email )

Geneva
Switzerland

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