Methodical Madness: Technical Analysis And The Irrationality Of Exchange-Rate Forecasts  

Oleh:

Chang, P. H. Kevin ; Osler, Carol L.

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Economic Journal (EBSCO) vol. 109 no. 458 (Oct. 1999), page 636-661.
Fulltext: 636.pdf (260.65KB)

Isi artikel

Substantial empirical research documents that exchange-rate forecasts are not formed rationally. This paper identi®es a common technical trading signal, the head-and-shoulders pattern, as a potential source of departures from rationality in exchange-rate forecasts. Forecasts based on this pattern are evaluated for daily dollar exchange rates over 1973 to 1994, using two criteria for rationality: pro®tability and ef®ciency. Resulting pro®ts, replicable in real-time, are tested for statistical signi®cance using a bootstrap technique. We ®nd that the rule is pro®table, but not ef®cient, since it is dominated by simpler trading rules.

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