Technical Trading Rule Profitability and Foreign Exchange Intervention

Blake LeBaron

NBER Working Paper No. 5505
Issued in March 1996
NBER Program(s):   AP

There is reliable evidence that simple rules used by traders have some predictive value over the future movement of foreign exchange prices. This paper will review some of this evidence and discuss the economic magnitude of this predictability. The profitability of these trading rules will then be analyzed in connection with central bank activity using intervention data from the Federal Reserve. The objective is to find out to what extent foreign exchange predictability can be confined to periods of central bank activity in the foreign exchange market. The results indicate that after removing periods in which the Federal Reserve is active, exchange rate predictability is dramatically reduced.

(921 K)

Published: Journal of International Economics, Vol. 49, no. 1 (October 1999): 125-143 .

This paper is available as PDF (921 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX