Is technical analysis in the foreign exchange market profitable? a genetic programming approach
Abstract: Using genetic programming techniques to find technical trading rules, we find strong evidence of economically significant out-of-sample excess returns to those rules for each of six exchange rates, over the period 1981-1995. Further, when the dollar/deutschemark rules are allowed to determine trades in the other markets, there is a significant improvement in performance in all cases, except for the deutschemark/yen. Betas calculated for the returns according to various benchmark portfolios provide no evidence that the returns to these rules are compensation for bearing systematic risk. Bootstrapping results on the dollar/deutschemark indicate that the trading rules are detecting patterns in the data that are not captured by standard statistical models.
Status: Published in Journal of Financial and Quantitative Analysis, December 1997
File(s): File format is application/pdf http://research.stlouisfed.org/wp/more/1996-006/
Provider: Federal Reserve Bank of St. Louis
Part of Series: Working Papers
Publication Date: 1997