Moving average technical trading strategies for currencies of emerging economies

Abstract

This paper studies the efficacy of using moving average technical trading rules with currencies of emerging economies. If technical trading rules are successful, they can become a risk management tool for multinational firms and investors in emerging markets. Typical risk management tools such as forwards, futures, and options are not sufficiently active in emerging currency markets. In this paper we use four Variable Length Moving Average (VMA) trading models and compare them to a simple buy and hold strategy. Results support the effectiveness of our trading models, which imply the presence of strong serial correlation among currency returns for emerging markets. As a result, the predictability of future currency prices will allow investors to create effective hedges in the often volatile emerging markets.

Citation

Ahmed, P., Beck, K. and Goldreyer, E. (2005), "Moving average technical trading strategies for currencies of emerging economies", Managerial Finance, Vol. 31 No. 5, pp. 14-27. https://doi.org/10.1108/03074350510769640