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A test of momentum trading strategies in foreign exchange markets: Evidence from the G7

Bianchi, Robert J., Drew, Michael E., & Polichronis, John (2005) A test of momentum trading strategies in foreign exchange markets: Evidence from the G7. Global Business and Economics Review, 7(2-3), pp. 155-179.

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Abstract

Abstract: In this trading strategy study, we ask three questions. • does momentum exist in foreign exchange markets? • what is the impact of transaction costs on excess returns? • can a consolidated trading signal garner excess returns and if so, what is the source of such returns? Using total return momentum strategies in the foreign exchange markets of the G7 for the period 1980 through 2004, the answers from this study are as follows: we find evidence of momentum; however, such momentum appears transitory, particularly for longer lookback periods. As expected, transaction costs have a material negative impact on excess returns. Finally, a consolidated signal garners excess returns; however, a bootstrap simulation finds that the source of these returns is a function of autocorrelation.

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ID Code: 8339
Item Type: Journal Article
Additional Information: For more information, please refer to the journal's website (see hypertext link) or contact the author. Author contact details: j.polichronis@qut.edu.au
Keywords: foreign exchange markets, total return momentum, trading rules, trading strategy, G7, transaction costs, excess returns, consolidated trading signals
DOI: 10.1504/GBER.2005.007613
ISSN: 1097-4954
Subjects: Australian and New Zealand Standard Research Classification > ECONOMICS (140000)
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Economics & Finance
Copyright Owner: Copyright 2005 Inderscience
Deposited On: 28 Jun 2007
Last Modified: 29 Feb 2012 23:13

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