A simple test of momentum in foreign exchange markets

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 cont...

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Autores Principales: Garcia-Suaza, Andres, Gómez González, Juan Eduardo
Formato: Documento de trabajo (Working Paper)
Lenguaje:Inglés (English)
Publicado: Universidad del Rosario 2011
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Acceso en línea:http://repository.urosario.edu.co/handle/10336/10984
id ir-10336-10984
recordtype dspace
spelling ir-10336-109842019-09-19T12:37:01Z A simple test of momentum in foreign exchange markets Garcia-Suaza, Andres Gómez González, Juan Eduardo Economía financiera Cambio exterior::Modelos Econométricos Mercado monetario Política monetaria Economía internacional Momentum Foreign exchange markets Hazard duration analysis Emerging economies 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 a§ecting the behavior of exchange rates in the short-run, we show evidence of exchange rate inertia; in other words, we Önd 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 Önd 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 2011-03 2015-10-06T15:22:05Z info:eu-repo/semantics/workingPaper info:eu-repo/semantics/acceptedVersion http://repository.urosario.edu.co/handle/10336/10984 Universidad del Rosario, Facultad de Economía eng info:eu-repo/semantics/openAccess application/pdf Universidad del Rosario Facultad de Economía instname:Universidad del Rosario reponame:Repositorio Institucional EdocUR instname:Universidad del Rosario
institution EdocUR - Universidad del Rosario
collection DSpace
language Inglés (English)
topic Economía financiera
Cambio exterior::Modelos Econométricos
Mercado monetario
Política monetaria
Economía internacional
Momentum
Foreign exchange markets
Hazard duration analysis
Emerging economies
spellingShingle Economía financiera
Cambio exterior::Modelos Econométricos
Mercado monetario
Política monetaria
Economía internacional
Momentum
Foreign exchange markets
Hazard duration analysis
Emerging economies
Garcia-Suaza, Andres
Gómez González, Juan Eduardo
A simple test of momentum in foreign exchange markets
description 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 a§ecting the behavior of exchange rates in the short-run, we show evidence of exchange rate inertia; in other words, we Önd 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 Önd 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
format Documento de trabajo (Working Paper)
author Garcia-Suaza, Andres
Gómez González, Juan Eduardo
author_facet Garcia-Suaza, Andres
Gómez González, Juan Eduardo
author_sort Garcia-Suaza, Andres
title A simple test of momentum in foreign exchange markets
title_short A simple test of momentum in foreign exchange markets
title_full A simple test of momentum in foreign exchange markets
title_fullStr A simple test of momentum in foreign exchange markets
title_full_unstemmed A simple test of momentum in foreign exchange markets
title_sort simple test of momentum in foreign exchange markets
publisher Universidad del Rosario
publishDate 2011
url http://repository.urosario.edu.co/handle/10336/10984
_version_ 1645140762820608000
score 11,365454