✦ LIBER ✦
High-frequency Markov switching models in the foreign exchange market
✍ Scribed by Ian W. Marsh
- Publisher
- John Wiley and Sons
- Year
- 2000
- Tongue
- English
- Weight
- 128 KB
- Volume
- 19
- Category
- Article
- ISSN
- 0277-6693
No coin nor oath required. For personal study only.
✦ Synopsis
This paper estimates two-state Markov models for three daily exchange rate series, and investigates the pro®tability of following the generated forecasts using the performance of simple chartist trading rules as benchmarks. It is shown that (1) the data are well approximated by Markov models, (2) the performance of previously pro®table trading rules has dramatically declined in the 1990s, and (3) the Markov models are unstable and not suitable for forecasting in their current form.