Optimal investment in the foreign exchange market with proportional transaction costs

We consider the excess return from 20 internationally tradable emerging market (EM) currencies against the US dollar. It has two contributions. First, we document stylized facts about EM currencies. EM currencies have provided significant equity-like excess returns against major currencies, but with low volatility. Picking EM currencies with a relatively high forward premium raises the portfolio return substantially. Second, our calculation incorporates institutional features of the foreign exchange market, such as lags in settling spot contracts, FX swaps, and bid/offer spreads. Transaction costs arising from bid/offer spreads are less than one-fifth of what is typically presumed in the literature. (JEL C58, F31, G15)

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Covered interest arbitrage with transaction costs: An evidence from the Hong Kong foreign exchange market

Asia Pacific Journal of Management ◽

10.1007/bf01731870 ◽

1994 ◽

Vol 11 (1) ◽

pp. 21-32 ◽

Cited By ~ 2

Author(s):

Cheung Kui-yin ◽

Daniel Chan Po-ming

Keyword(s):

Hong Kong ◽

Transaction Costs ◽

Foreign Exchange ◽

Foreign Exchange Market ◽

Exchange Market

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INDIVIDUAL FOREIGN EXCHANGE INVESTORS, RETURN PREDICTABILITY AND MARKET TIMING

Annals of Financial Economics ◽

10.1142/s2010495217500014 ◽

2017 ◽

Vol 12 (01) ◽

pp. 1750001 ◽

Cited By ~ 1

Author(s):

MOUSTAFA ABUELFADL

Keyword(s):

Transaction Costs ◽

Empirical Evidence ◽

Foreign Exchange ◽

Private Information ◽

Foreign Exchange Market ◽

Linear Independence ◽

Market Timing ◽

Return Predictability ◽

Exchange Market

This study tests whether individual foreign exchange (Forex) investors can predict future returns, time the market and generate alpha after transaction costs. Using a sample of 1,231 Forex trading accounts and 72,072 trades, the results show that individual Forex investors can predict future returns up to eight days after trade execution, even after controlling for Volatility. The results of return predictability are significant because they support the idea that linear independence is rejected as well as provide empirical evidence that private information is available in the foreign exchange market.

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A Study On Technical Analysis With Reference To International Forex

Think India ◽

10.26643/think-india.v22i3.8470 ◽

2019 ◽

Vol 22 (3) ◽

pp. 1129-1144

Author(s):

Bichith C. Sekhar ◽

A. Umamaheswari

Keyword(s):

Foreign Exchange ◽

Abnormal Return ◽

Foreign Exchange Market ◽

Relative Strength ◽

Exchange Market ◽

Strength Index ◽

Technical Tool ◽

Alpha Beta ◽

Decentralized Market ◽

Currency Conversion

The foreign exchange market (Forex, FX, or currency market) is a global decentralized market for the trading of currencies. The foreign exchange market assists international trade and investments by enabling currency conversion. Our study is to test the technical tools to analyze about the technical impact and its return in the market. For this purpose 13 cross currency pairs were taken as sample size and Jensen’s Alpha, Beta, Relative Strength Index, and Buy and Hold Abnormal Return were used as technical tool for analysis and the conclusion is that it’s not preferred to invest in JPY pairs as the volatility and the return are not up to the mark and its preferred to invest in EURCAD as the return was high when compared to other scripts and the market was moving accordingly to its cross currency pair.

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