The Economic Value of Fundamental and Technical Information in Emerging Currency Markets
2007-12-21
Research Paper
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We measure the economic value of information derived from macroeconomic variables and from technical trading rules for emerging markets currency investments. Our analysis is based on a sample of 21 emerging markets with a floating exchange rate regime over the period 1997-2007 and explicitly accounts for trading restrictions on foreign capital movements by using non-deliverable forward data. We document that both types of information can be exploited to implement profitable trading strategies. In line with evidence from surveys of foreign exchange professionals concerning the use of fundamental and technical analysis, we find that combining the two types of information improves the risk-adjusted performance of the investment strategies.
Keywords
- emerging markets
- foreign exchange rates
- heterogeneous agents
- technical trading
- structural exchange rate models
Classifications using
Journal of Economic Literature (JEL) Classification System
- G3 : Corporate Finance and Governance
- E43 : Determination of Interest Rates; Term Structure of Interest Rates
- M : Business Administration and Business Economics; Marketing; Accounting
Automatically Extracted Terms
- currency
- strategy
- market
- exchange
- return
- trading
- portfolio
- sharpe
- performance
- chartist
- table
- period
- ratio
- information
- sharpe ratios
- sharpe ratio
- exchange rates
- result
- currency markets
- model
