A simple test of momentum in foreign exchange markets

Andrés Felipe García-Suaza, José E. Gómez González

Resultado de la investigación: Contribución a RevistaArtículo

7 Citas (Scopus)

Resumen

This study proposes a new method for testing for the presence of momentum in nominal exchange rates, using a probabilistic approach. We illustrate our methodology estimating a binary response model using information on local currency / US dollar exchange rates of eight emerging economies. After controlling for important variables affecting the behavior of exchange rates in the short-run, we show evidence of exchange rate inertia; in other words, we find that exchange rate momentum is a common feature in this group of emerging economies, and thus foreign exchange traders participating in these markets are able to make excess returns by following technical analysis strategies. We find that the presence of momentum is asymmetric, being stronger in moments of currency depreciation than of appreciation. This behavior may be associated with central bank intervention.
Idioma originalEnglish (US)
Páginas (desde-hasta)66-77
Número de páginas12
PublicaciónEmerging Markets Finance and Trade
DOI
EstadoPublished - ene 1 2012

Huella dactilar

Exchange rates
Foreign exchange market
Momentum
Emerging economies
Binary response model
Excess returns
Currency depreciation
Foreign exchange
Technical analysis
Traders
Common features
Central bank intervention
Methodology
Nominal exchange rate
Currency
Inertia
Short-run
Testing

Citar esto

García-Suaza, Andrés Felipe ; Gómez González, José E. / A simple test of momentum in foreign exchange markets. En: Emerging Markets Finance and Trade. 2012 ; pp. 66-77.
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A simple test of momentum in foreign exchange markets. / García-Suaza, Andrés Felipe; Gómez González, José E.

En: Emerging Markets Finance and Trade, 01.01.2012, p. 66-77.

Resultado de la investigación: Contribución a RevistaArtículo

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