Technical Trading-Rule Profitability, Data Snooping, and Reality Check: Evidence from the Foreign Exchange Market

Journal of Money, Credit and Banking, Vol. 38, pp. 2135-2158, December 8, 2005

35 Pages Posted: 15 Mar 2010

See all articles by Min Qi

Min Qi

Office of the Comptroller of the Currency - Credit Risk Analysis Division

Yangru Wu

Rutgers University, Newark - School of Business - Department of Finance & Economics

Date Written: August 22, 2005

Abstract

We report evidence on the profitability and statistical significance among 2,127 technical trading rules. The best rules are found to be significantly profitable based on standard tests. We then employ White's (2000) Reality Check to evaluate these rules and find that data-snooping biases do not change the basic conclusions for the full sample. A sub-sample analysis indicates that the data-snooping problem is more serious in the second half of the sample. Profitability becomes much weaker in the more recent period, suggesting that the foreign exchange market becomes more efficient over time. Evidence from cross exchange rates confirms the basic findings.

Keywords: Foreign Exchange, Technical Trading, Data Snooping, Reality Check

JEL Classification: F31, G15

Suggested Citation

Qi, Min and Wu, Yangru, Technical Trading-Rule Profitability, Data Snooping, and Reality Check: Evidence from the Foreign Exchange Market (August 22, 2005). Journal of Money, Credit and Banking, Vol. 38, pp. 2135-2158, December 8, 2005, Available at SSRN: https://ssrn.com/abstract=788013

Min Qi

Office of the Comptroller of the Currency - Credit Risk Analysis Division ( email )

250 E Street, SW
Washington, DC 20219
United States

Yangru Wu (Contact Author)

Rutgers University, Newark - School of Business - Department of Finance & Economics ( email )

1 Washington Park
Newark, NJ 07102
United States
973-353-1146 (Phone)
973-353-1006 (Fax)

HOME PAGE: http://andromeda.rutgers.edu/~yangruwu

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