Technical Analysis in Foreign Exchange Market
Date Issued
2007
Date
2007
Author(s)
Lin, Kuen-Liang
DOI
zh-TW
Abstract
The economics of exchange rates is one of the primary focuses of international economists, who analyze the foreign exchange rates from the fundamentals of economics. Many academic literatures and empirical studies, however, indicate the prediction ability of traditional economic models is not significant. The observation becomes the puzzle of the exchange rate determination. Therefore, other scholars began to attempt to examine exchange rate fluctuation via the market microstructure theory. Whether it is fundamental analysis, market microstructure or technical analysis, the ultimate purpose is the same – to answer one most basic question: Can the foreign exchange rates be predicted?
From the perspective of technical analysis, this study conducts back testing through program trading systems. The period of study spans from 1986 to 2005. For the daily exchange rate data of 11 currencies, 8 frequently used technical analysis indicators are selected: MA, MACD, KD, SAR, MTM, SAR, DMI and Channel. Findings of the empirical analysis indicate: 1.The trend-following trading systems is superior to the range trading systems. 2. Technical analysis is cannot help obtain excess returns. Therefore, the weak form foreign exchange market efficiency stands.
Subjects
外匯市場
技術分析
匯率
程式交易
市場效率性
foreign exchange market
technical analysis
exchange rate
program trading system
market efficiency
Type
thesis
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