TY  - JOUR
AU  - Levich,Richard M.
AU  - Thomas,Lee R.
TI  - The Significance of Technical Trading-Rule Profits in the Foreign Exchange Market:  A Bootstrap Approach
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3818
PY  - 1994
Y2  - April 1994
UR  - http://www.nber.org/papers/w3818
L1  - http://www.nber.org/papers/w3818.pdf
N1  - Author contact info:
Richard M. Levich
Stern School of Business
New York University
44 West 4th Street
New York, NY 10012
Tel: 212/998-0422
Fax: 212/995-4256
E-Mail: RLEVICH@STERN.NYU.EDU
AB  - In this paper, we present new evidence on the profitability and statistical significance of technical trading rules in the foreign exchange market. We utilize a new data base, currency futures contracts for the period 1976-1990, and we implement a new testing procedure based on bootstrap methodology. Using this approach, we generate thousands of new exchange rate series constructed by random reordering of each original series. We then measure the profitability of the technical rules for each new series. The significance of the profits in the original series is assessed by comparison to the empirical distribution of results derived from the thousands of randomly generated series. Overall, our results suggest that simple technical trading rules have very often led to profits that are highly unusual. Splitting the entire 15-year sample period into three 5-year periods reveals that on average the profitability of some trading rules declined in the 1986-1990 period although profits remained positive (on average) and significant in many cases.
ER  -