Searching for Inefficiencies in Exchange Rate Dynamics
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- 作者：Guglielmo Maria Caporale ; Luis Gil-Alana ; Alex Plastun
- 关键词：Pair trading ; Oscillator ; Trading strategy ; Convergence/divergence indicator (CDI) ; Exchange rates
- 刊名：Computational Economics
- 出版年：2017
- 出版时间：March 2017
- 年：2017
- 卷：49
- 期：3
- 页码：405-432
- 全文大小：3607KB
- 刊物类别：Business and Economics
- 刊物主题：Economic Theory/Quantitative Economics/Mathematical Methods; Computer Appl. in Social and Behavioral Sciences; Operation Research/Decision Theory; Behavioral/Experimental Economics; Math Applications
- 出版者：Springer US
- ISSN：1572-9974
- 卷排序：49
文摘
This paper develops a new pair trading method to detect inefficiencies in exchange rates movements and arbitrage opportunities using a convergence/divergence indicator (CDI) belonging to the oscillatory class. The proposed technique is applied to 11 exchange rates over the period 2010–2015, and trading rules based on CDI signals are obtained. The CDI indicator is shown to outperform others of the oscillatory class and in some cases (for EURAUD and AUDJPY) to generate profits. The suggested approach is of general interest and can be applied to different financial markets and assets.