Have trading rule profits in the currency markets declined over time?

Olson, Dennis

doi:10.1016/s0378-4266(02)00399-0

Cited by 185 publications

(136 citation statements)

References 20 publications

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“…In time series analysis, a crossover between a shorter-term and a longer-term average is typically one of the most basic signals suggesting the occurrence of a trend change in the raw data (Olson 2004;Shambora and Rossiter 2007). A crossover is defined as the point where a short-term moving average (c-SMA) line crosses through a long-term one (c-LMA).…”

Section: First Alarm Threshold: Onset Of Accelerationmentioning

confidence: 99%

Guidelines on the use of inverse velocity method as a tool for setting alarm thresholds and forecasting landslides and structure collapses

et al. 2016

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Predicting the time of failure is a topic of major concern in the field of geological risk management. Several approaches, based on the analysis of displacement monitoring data, have been proposed in recent years to deal with the issue. Among these, the inverse velocity method surely demonstrated its effectiveness in anticipating the time of collapse of rock slopes displaying accelerating trends of deformation rate. However, inferring suitable linear trend lines and deducing reliable failure predictions from inverse velocity plots are processes that may be hampered by the noise present in the measurements; data smoothing is therefore a very important phase of inverse velocity analyses. In this study, different filters are tested on velocity time series from four case studies of geomechanical failure in order to improve, in retrospect, the reliability of failure predictions: Specifically, three major landslides and the collapse of an historical city wall in Italy have been examined. The effects of noise on the interpretation of inverse velocity graphs are also assessed. General guidelines to conveniently perform data smoothing, in relation to the specific characteristics of the acceleration phase, are deduced. Finally, with the aim of improving the practical use of the method and supporting the definition of emergency response plans, some standard procedures to automatically setup failure alarm levels are proposed. The thresholds which separate the alarm levels would be established without needing a long period of neither reference historical data nor calibration on past failure events.

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Section: First Alarm Threshold: Onset Of Accelerationmentioning

confidence: 99%

Guidelines on the use of inverse velocity method as a tool for setting alarm thresholds and forecasting landslides and structure collapses

et al. 2016

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“…He argues that the apparent dynamic instability of the returns to the rules could discourage potential users from exploiting them. Okunev and White (2003) and Olson (2004), using different optimizing procedures to select MA trading strategies, arrive at different conclusions on their continued profitability. Okunev and White (2003) considered whether momentum strategies in MA rules could continue to produce positive results in the recent era.…”

Section: Introductionmentioning

confidence: 99%

The Adaptive Markets Hypothesis: Evidence from the Foreign Exchange Market

Neely¹,

Weller²,

Ulrich

2009

J. Financ. Quant. Anal.

209

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We analyze the intertemporal stability of excess returns to technical trading rules in the foreign exchange market by conducting true, out-of-sample tests on previously studied rules. The excess returns of the 1970s and 1980s were genuine and not just the result of data mining. But these profit opportunities had disappeared by the early 1990s for filter and moving average rules. Returns to less-studied rules also have declined but have probably not completely disappeared. High volatility prevents precise estimation of mean returns. These regularities are consistent with the Adaptive Markets Hypothesis (Lo, 2004), but not with the Efficient Markets Hypothesis.JEL Codes: F31, G14, G11

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“…They explain the observation as being consistent with Adaptive Market Hypothesis (Lo, 2004). Olson (2004) arrives at a similar conclusion, noting that moving-average trading rule profits (risk-adjusted) have declined from 3.5% during 1970 to around 0% from 1990 to 2000 across 18 exchange rate series. Chavarnakul and Enke (2008) employ generalized regression neural network (GRNN) to construct two trading strategies based on equivolume charting that predict the next day's price using volume and price based technical indicators.…”

Section: Introductionmentioning

confidence: 66%

Empirical evaluation of price-based technical patterns using probabilistic neural networks

Ahlawat

2017

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Abstract. Technical analysis is the art of identifying patterns in historical data with the belief that certain patterns foretell future price movements. An empirical evaluation of the effectiveness of technical analysis is confounded by the subjectivity involved in identifying patterns. This work presents a robust framework for pattern identification using probabilistic neural networks (PNN). The thirty components of the Dow Jones Industrial Average and a set of ten indices are considered. Fourteen patterns are analyzed. In order to test the possibility that technical patterns are more predictable in certain market environments, the period under study is partitioned into bull and bear markets and the statistical significance of profits earned by identified patterns observed in each environment is analyzed. A range of holding periods from 10 to 50 trading days is considered and a simple model of transaction costs is added. The study reveals that no pattern produces statistically and economically significant profits for a cross-section of stocks and indices analyzed, though a few patterns are more successful predictors. Bullish (bearish) patterns are more reliable predictors in bullish (bearish) market environments. These observations can be explained by the Adaptive Market Hypothesis with certain patterns becoming more accurate predictors in specific market environments.

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Have trading rule profits in the currency markets declined over time?

Cited by 185 publications

References 20 publications

Guidelines on the use of inverse velocity method as a tool for setting alarm thresholds and forecasting landslides and structure collapses

Guidelines on the use of inverse velocity method as a tool for setting alarm thresholds and forecasting landslides and structure collapses

The Adaptive Markets Hypothesis: Evidence from the Foreign Exchange Market

Empirical evaluation of price-based technical patterns using probabilistic neural networks

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