A comparison of ma and rsi returns with exchange rate intervention
Download
1 / 31

A comparison of MA and RSI returns with exchange rate intervention - PowerPoint PPT Presentation


  • 95 Views
  • Uploaded on

A comparison of MA and RSI returns with exchange rate intervention. Group Members: Zhang Duo A0075433 Tang Wai Hoh A0075413 Fan Li A0075376. outline. Introduction of the paper Data & Trading Strategy Methodology & Empirical Results Work in Progress & Future Exploration.

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about ' A comparison of MA and RSI returns with exchange rate intervention ' - patricia-arden


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
A comparison of ma and rsi returns with exchange rate intervention

A comparison of MA and RSI returns with exchange rate intervention

Group Members:

Zhang Duo A0075433

Tang Wai Hoh A0075413

Fan Li A0075376


Outline
outline

  • Introduction of the paper

  • Data & Trading Strategy

  • Methodology & Empirical Results

  • Work in Progress & Future Exploration



Introduction of the paper1
Introduction of the Paper

  • TOPIC: A comparison of MA and RSI returns with

    exchange rate intervention

  • Authors: Thomas C. Shik and Terence Tai-Leung Chong

  • Structure:

  • Two Trading Strategies: MA & RSI

  • Six Currencies: AUD/USD, CHF/USD, DEM/USD, JPY/USD, BP/USD, EUR/USD

  • Three Panels:

    Panel A: All observations

    Panel B: Remove domestic & foreign interests

    Panel C: Remove factor of intervention





Data of our research
DATA of Our Research

  • Foreign Exchange Rates

  • Resource 1 : H.10 Federal Reserve Statistical Release (since 1971)

    http://www.federalreserve.gov/releases/h10/hist/default1989.htm

  • Resource 2: Yahoo Finance (since 27 Dec 2007)

    http://sg.finance.yahoo.com/q/hp?s=GBB

  • Interest Rates(Some)

  • Resource 3: Bloomberg (since 2001)

  • Intervention Data(Only One)

  • Resource 4: JPY/USD Intervention Data(Apr 1991-Mar 2001)

    http://www.mof.go.jp/english/feio/e034_133.htm

  • Risk-free Rate(Done)

  • Resource 5: H.15 Federal Reserve Statistical Release (since 1977)

    http://www.federalreserve.gov/releases/h15/data/Business_day/H15_TCMNOM_Y30.txt



Acf s for exchange rate series
ACF s for Exchange Rate Series

  • Serially Correlated possible to make profits by

    investigating its history

Define:

Regression:

Serially Correlated!!


Trading strategies
Trading Strategies

MA

RSI

  • Definition

  • Long the USD if

  • Short the USD if

  • Definition

  • Long the USD if

  • Short the USD if

Note: Pt : Exchange rate at time t, N: Number of days.


Trading strategies1
Trading Strategies

RSI in General Form

----Average of N days up prices

----Average of N days down prices

RSI in the paper

-SMA

RSI in algoquant

-EMA


Methodology empirical results

Methodology & Empirical Results


Methodology empirical result
Methodology & Empirical Result

  • Mean Annual Returns & Standard Deviation

  • Hypothesis Testing t-statistic

  • Sharpe Ratios


Mean annual returns
Mean Annual Returns

  • Window widths for the study are 10-, 20-, 50- and 150- days.

  • Daily returns:

  • Removing interest rate differentials:

Note: rt* = foreign interest rate, rt is the domestic interest rate


Total returns
Total Returns

  • Sum of daily returns:

  • Average return from time 0 to T:

  • Mean Annual Returns is computed by multiplying with the number of trading days.


Hypothesis testing
Hypothesis Testing

  • Let μ and σ be the mean and standard deviation of the daily returns respectively.

  • Sample mean:

  • Hypothesis H0 : μ = 0 vs H1: μ ≠ 0 tested using.

    - Efficient market with no arbitrage has a mean zero.

  • S = sample standard deviation


Sharpe ratios
Sharpe Ratios

  • be the mean annual return and be standard deviation.

  • Rfis the risk-free rate.

measure of the excess return (or risk premium) per unit of risk in an investment asset or a trading strategy


Statistic terms in the tables
Statistic terms in the Tables

  • Obs. : number of observations.

  • Mean : mean annual return in percentage.

  • Std (daily returns) : standard deviation of the daily returns.

  • t-stat : t-statistic value.

  • P-value : tail probability generated by the observed test statistic under the null hypothesis.



Work in progress future exploration

Work in Progress & Future Exploration


Work in progress
Work in Progress

EUR/USD – 50-days window width


Work in progress1
Work in Progress

EUR/USD – 50-days window width


Work in progress2
Work in Progress

JYN/USD – 50-days window width


A comparison of ma and rsi returns with exchange rate intervention

Work in Progress

JYN/USD – 50-days window width


A comparison of ma and rsi returns with exchange rate intervention

Work in Progress

GBP/USD – 10-days window width


A comparison of ma and rsi returns with exchange rate intervention

Work in Progress

GBP/USD – 10-days window width


Current challenges
Current Challenges

  • Quotation data other than Yahoo Finance

  • How to store the data/dates at the crossover

    points and then to do the return analysis

    (mean, std, t-stat, P-value, Sharpe ratios)

  • Obstacles in getting information regarding

    government interventions and interest rate


Further exploration
Further Exploration

  • Simulate results under Panel A & C

    (Domestic/Foreign interest rates & GOV interventions)

  • Introducing other MA model (i.e. EMA)

  • Include transaction cost

  • Include two more bounds for RSI

    a) >70 – overbought - SELL

    b) <30 – oversold - BUY


Rsi with 30 50 70 bounds
RSI with 30, 50, 70 bounds

Hit 70 from below:

Sell

Hit 50 from above:

Sell

Hit 50 from below:

Buy

Hit 30 from above:

Buy


Q a thank you

Q & AThank You!