The authors would like to thank Thomas McCurdy and an anonymous referee for many helpful suggestions and comments. All remaining errors are, however, our own.
Temporal Patterns in Foreign Exchange Returns and Options
Article first published online: 18 APR 2007
Journal of Money, Credit and Banking
Volume 39, Issue 2-3, pages 443–470, March–April 2007
How to Cite
CHARLEBOIS, M. and SAPP, S. (2007), Temporal Patterns in Foreign Exchange Returns and Options. Journal of Money, Credit and Banking, 39: 443–470. doi: 10.1111/j.0022-2879.2007.00032.x
- Issue published online: 18 APR 2007
- Article first published online: 18 APR 2007
- Received March 22, 2005; and accepted in revised form February 27, 2006.
- technical analysis;
- exchange rates;
Although the foreign exchange market is believed to be one of the most efficient financial markets in the world, there is significant evidence that technical analysis is profitable in this market. In this study we investigate the ability of information from the options market to supplement the commonly used information on past prices to predict temporal patterns in foreign exchange returns. We find that strategies using information from at-the-money options were more consistently profitable than the commonly used strategies based on only historical spot exchange rates (past prices). Consequently, options appear to contain information regarding future spot exchange rate movements.