Weak-Form Efficiency in Currency Markets

Pukthuanthong‐Le, Kuntara; Thomas, Lee R.

doi:10.2469/faj.v64.n3.5

Cited by 27 publications

(4 citation statements)

References 29 publications

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“…Table 5 shows that when only non-emerging market currencies are used, about half of the 10strategy and 50-strategy portfolios earn negative excess returns in the final sample (2000)(2001)(2002)(2003)(2004)(2005)(2006)(2007)(2008)(2009)(2010)(2011)(2012) 20 and none of the portfolios earn statistically significant positive Sharpe ratios. This result is consistent with the literature and the results of Pukthuanthong-Le et al (2007) andPukthuanthong- Le and Thomas (2008), who find that emerging market currencies appear to provide profit opportunities to technical rules.…”

Section: Currency Portfolios and Diversificationsupporting

confidence: 93%

Lessons from the Evolution of Foreign Exchange Trading Strategies

Neely

Weller

2012

SSRN Journal

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The adaptive markets hypothesis posits that trading strategies evolve as traders adapt their behavior to changing circumstances. This paper studies the evolution of trading strategies for a hypothetical trader who chooses portfolios from foreign exchange (forex) technical rules in major and emerging markets, the carry trade, and U.S. equities. The results show that a backtesting procedure to choose optimal portfolios improves upon the performance of nonadaptive rules. We also find that forex trading alone dramatically outperforms the S&P 500, with much larger Sharpe ratios over the whole sample, but there is little gain to coordinating forex and equity strategies, which explains why practitioners consider these tools separately. Forex trading returns dip significantly in the 1990s but recover by the end of the decade and have been markedly superior to an equity position since 1998. Overall, trading rule returns still exist in forex markets-with substantial stability in the types of rules-though they have migrated to emerging markets to a considerable degree.

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Section: Currency Portfolios and Diversificationsupporting

confidence: 93%

Lessons from the Evolution of Foreign Exchange Trading Strategies

Neely

Weller

2012

SSRN Journal

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“…Neely, Weller, and Ulrich (2009) show that these rules are still profitable until the end of their sample period in 2005. Pukthuanthong-Le and Thomas III (2008) confirm that standard trading rules in the main exchange rates do not generate profits when recent data are considered, whereas the same rules yield high returns in emerging markets' exchange rates.…”

Section: Introductionmentioning

confidence: 87%

Currency Momentum Strategies

et al. 2011

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This is the unspecified version of the paper.This version of the publication may differ from the final published version. Permanent AbstractWe provide a broad empirical investigation of momentum strategies in the foreign exchange market. We find a significant cross-sectional spread in excess returns of up to 10% p.a. between past winner and loser currencies. This spread in excess returns is not explained by traditional risk factors, it is partially explained by transaction costs and shows behavior consistent with investor under-and over-reaction. Moreover, crosssectional currency momentum has very different properties from the widely studied carry trade and is not highly correlated with returns of benchmark technical trading rules. However, there seem to be very effective limits to arbitrage which prevent momentum returns from being easily exploitable in currency markets.JEL Classification: F31, G12, G15.

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“…Pukthuanthong-Le et al (2007) andPukthuanthong-Le and Thomas (2008) conclude that investor learning is consistent with the erosion of profits from technical trading rules in major, more liquid currencies and their cross exchange rates as well as evidence of significant profits for new strategies using more sophisticated technical models on more complex relationships or applied at higher frequencies or trading in more exotic and newly liquid exchange…”

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confidence: 83%

Mispricing and Risk Premia in Currency Markets

Bartram,

Djuranovik,

Garratt

et al. 2023

SSRN Journal

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Weak-Form Efficiency in Currency Markets

Cited by 27 publications

References 29 publications

Lessons from the Evolution of Foreign Exchange Trading Strategies

Lessons from the Evolution of Foreign Exchange Trading Strategies

Currency Momentum Strategies

Mispricing and Risk Premia in Currency Markets

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