Topic
Foreign exchange market
About: Foreign exchange market is a research topic. Over the lifetime, 6661 publications have been published within this topic receiving 153384 citations. The topic is also known as: forex & FX.
Papers published on a yearly basis
Papers
More filters
TL;DR: The authors developed an equilibrium model in which exchange rates, stock prices and capital flows are jointly determined under incomplete forex risk trading, showing that higher returns in the home equity market relative to the foreign equity market are associated with a home currency depreciation and net equity flows into the foreign market are positively correlated with a foreign currency appreciation.
Abstract: We develop an equilibrium model in which exchange rates, stock prices and capital flows are jointly determined under incomplete forex risk trading. Incomplete hedging of forex risk, documented for US global mutual funds, has three important implications: 1) exchange rates are almost as volatile as equity prices when the forex liquidity supply is not infinitely price elastic; 2) higher returns in the home equity market relative to the foreign equity market are associated with a home currency depreciation; 3) net equity flows into the foreign market are positively correlated with a foreign currency appreciation. The model predictions are strongly supported at daily, monthly and quarterly frequencies for 17 OECD countries vis-a-vis the US. Moreover, correlations are strongest after 1990 and for countries with higher market capitalization relative to GDP, suggesting that the observed exchange rate dynamics are indeed related to equity market development.
393 citations
TL;DR: A reading of the large literature on this topic allows us to establish a set of stylised facts, including the facts that technical analysis is an important and widely used method of analysis in the foreign exchange market and that applying certain technical trading rules over a sustained period may lead to significant positive excess returns as mentioned in this paper.
Abstract: Technical analysis involves the prediction of future exchange rate (or other asset-price) movements from an inductive analysis of past movements. A reading of the large literature on this topic allows us to establish a set of stylised facts, including the facts that technical analysis is an important and widely used method of analysis in the foreign exchange market and that applying certain technical trading rules over a sustained period may lead to significant positive excess returns. We then analyze four arguments that have been put forward to explain the continuing widespread use of technical analysis and its apparent profitability: that the foreign exchange market may be characterised by not-fully-rational behaviour; that technical analysis may exploit the influence of central bank interventions; that technical analysis may be an efficient form of information processing; and finally that it may provide information on non-fundamental influences on foreign exchange movements. Although all of these positions may be relevant to some degree, neither non-rationality nor official interventions seem to be widespread and persistent enough to explain the obstinate passion of foreign exchange professionals for technical analysis.
393 citations
TL;DR: Empirical evidence that a neural network model is applicable to the prediction of foreign exchange rates and several issues on the frequency of sampling, choice of network architecture, forecasting periods, and measures for evaluating the model’s predictive power are reported.
392 citations
01 Mar 1992
TL;DR: Two main views of exchange rate determination have evolved since the early 1970s: the monetary approach to the exchange rate (in flexible price, sticky price, and real interest differential formulations); and the portfolio balance approach as discussed by the authors.
Abstract: Two main views of exchange rate determination have evolved since the early 1970s: the monetary approach to the exchange rate (in flexible-price, sticky-price, and real interest differential formulations); and the portfolio balance approach. The literature on these views is surveyed, followed by a discussion of the empirical evidence and likely future developments in the area of exchange rate determination. The literature on foreign exchange market efficiency, exchange rates and "news," and international parity conditions is also reviewed.
391 citations
Posted Content•
TL;DR: This article developed an equilibrium model in which exchange rates, stock prices and capital flows are jointly determined under incomplete forex risk trading, and the model predictions are strongly supported at daily, monthly and quarterly frequencies for 17 OECD countries vis-...-vis the U.S.
Abstract: We develop an equilibrium model in which exchange rates, stock prices and capital flows are jointly determined under incomplete forex risk trading. Incomplete hedging of forex risk, documented for U.S. global mutual funds, has three important implications: 1) exchange rates are almost as volatile as equity prices when the forex liquidity supply is not infinitely price elastic; 2) higher returns in the home equity market relative to the foreign equity market are associated with a home currency depreciation; 3) net equity flows into the foreign market are positively correlated with a foreign currency appreciation. The model predictions are strongly supported at daily, monthly and quarterly frequencies for 17 OECD countries vis-...-vis the U.S. Moreover, correlations are strongest after 1990 and for countries with higher market capitalization relative to GDP, suggesting that the observed exchange rate dynamics is indeed related to equity market development.
390 citations