Trading Rule Profitability and Interventions in the Dollar-Deutschmark Market

23 Pages Posted: 3 Apr 2000

See all articles by Michael Frenkel

Michael Frenkel

WHU Otto Beisheim Graduate School of Management

Georg Stadtmann

WHU Otto Beisheim School of Management

Date Written: March 16, 2000

Abstract

The paper examines the period 1979 - 1992 for the relationship between central bank interventions in the dollar-deutschmark market and the profitability of technical trading and also investigates the profitability of interventions. While previous work on this topic has focused on the interventions of the Fed, we include Bundesbank interventions and show that there were several similarities. Our analysis yields the result that eliminating days of Fed and Bundesbank interventions makes a simple moving average trading rule unprofitable. In addition, we study the dynamics of intraday exchange rates following and preceding interventions and provide a VAR analysis on the relationship between interventions and the change in the exchange rate. The results suggest that interventions did not cause the frequently found high profits of technical trading on intervention days.

Keywords: Technical trading rules, chartism, efficient markets, central bank intervention policy, bootstrap

JEL Classification: F31, F33, G14, G15

Suggested Citation

Frenkel, Michael and Stadtmann, Georg, Trading Rule Profitability and Interventions in the Dollar-Deutschmark Market (March 16, 2000). Available at SSRN: https://ssrn.com/abstract=218068 or http://dx.doi.org/10.2139/ssrn.218068

Michael Frenkel (Contact Author)

WHU Otto Beisheim Graduate School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany
0049 261 6509281 (Phone)
0049 261 6509279 (Fax)

Georg Stadtmann

WHU Otto Beisheim School of Management ( email )

Burgplatz 2
D-56179 Vallendar
Germany
+49 261 6509 273 (Phone)
+49 261 6509 279 (Fax)

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