Exploring Trading Strategies and Their Effects in the Foreign Exchange Market

One of the most critical issues that developers face in developing automatic systems for electronic markets is that of endowing the agents with appropriate trading strategies. In this article, we examine the problem in the foreign exchange (FX) market, and we use an agent‐based market simulation to examine which trading strategies lead to market states in which the stylized facts (statistical properties) of the simulation match those of the FX market transactions data. Our goal is to explore the emergence of the stylized facts, when the simulated market is populated with agents using different strategies: a variation of the zero intelligence with a constraint strategy, the zero‐intelligence directional‐change event strategy, and a genetic programming‐based strategy. A series of experiments were conducted, and the results were compared with those of a high‐frequency FX transaction data set. Our results show that the zero‐intelligence directional‐change event agents best reproduce and explain the properties observed in the FX market transactions data. Our study suggests that the observed stylized facts could be the result of introducing a threshold that triggers the agents to respond to periodic patterns in the price time series. The results can be used to develop decision support systems for the FX market

Technical Analysis and Stochastic Properties of Exchange Rate Movements: Empirical Evidence from the Romanian Currency Market

Romanian currency market considering the episodic character of linear and/or nonlinear dependencies, between 1999 and 2008. The main conclusion is that profitability of moving average strategies is not constant over time and that is mainly due to linear and nonlinear episodic dependencies. The trading rule profits did not declined over time in the case of the Romanian currency market. Exploring the causes of profitability, it was found that it was closely related to the intensity of manifestation of episodic linear and nonlinear dependencies, the state of the market, and it was not the result of a time varying risk premium. The empirical results are consistent with the Adaptive Markets Hypothesis (Lo, 2004), but not with the Efficient Market Hypothesis.technical analysis, exchange rate, random walk, episodic dependencies, bicorrelation test

CURRENT ISSUES AFFECTING TRADE AND TRADE POLICY: AN ANNOTATED LITERATURE REVIEW

This review provides a base of literature describing current issues and research on the impacts of lobalization and the industrialization of agriculture and recent approaches to analyze and model agricultural trade and trade policies. Three key factors of the survey are differentiated goods, global economic integration and international supply chain linkages. The review covers 182 publications, which are presented alphabetically by author with a brief annotation describing how it relates to the above criteria. The articles are also indexed by keyword. A brief summary highlights the documented literature and includes a series of issues for future discussion and research.International Relations/Trade,

Exploring Investor Attention in Financial Models

The purpose of this study is to investigate whether stock prices are influenced by investor attention and how this, in turn, can be used to better advise the financial decisions of the everyday investor. Using weekly adjusted close data, weekly traded volumes, and weekly company searches using Google Trends, I tested my hypothesis that including the frequency of company searches, found through consumers using Google, in financial models will help better predict stock returns. Using S&P 500 company data from February 2012 to February 2017, frequency is a better predictor of price in comparison to trading volumes. But, to maximize predictability, both frequency and volume should be used to predict price. Further investigation revealed that the Health Care and Energy sectors tend to have the strongest correlation between frequency and volume, compared to the Consumer Staples and Utilities sectors, which tend to attract individual investors

Order Flow and Exchange Rate Dynamics

Macroeconomic models of nominal exchange rates perform poorly. In sample, R2 statistics as high as 10 percent are rare. Out of sample, these models are typically out-forecast by a na‹ve random walk. This paper presents a model of a new kind. Instead of relying exclusively on macroeconomic determinants, the model includes a determinant from the field of microstructure-order flow. Order flow is the proximate determinant of price in all microstructure models. This is a radically different approach to exchange rate determination. It is also strikingly successful in accounting for realized rates. Our model of daily exchange-rate changes produces R2 statistics above 50 percent. Out of sample, our model produces significantly better short-horizon forecasts than a random walk. For the DM/$spot market as a whole, we find that$1 billion of net dollar purchases increases the DM price of a dollar by about 1 pfennig.

Stock exchanges and regional competitiveness: the case of small German exchanges

The analysis of financial centers focuses mainly on the competition between and changing roles of the major places. In the European context thus usually London, Paris, Frankfurt/Main and other national financial centers have become objects of investigation. The findings show that the recent reorganisation of financial centers in Europe under the conditions of widespread use of ICT with the possibility of remote access to exchanges, the development of innovative products on financial markets, and the advent of a single currency affects structures, organisation and specialization of the main actors within financial centers, i.e. banks and exchanges. The planned but failed merger between London Stock Exchange and Deutsche Börse AG in Frankfurt/Main in 2000 has probably been one of the publicly most noticed aspects of this development. The proposed paper wants to put a focus on less prominent features of current restructuring, namely the roles and strategies of minor German exchanges. The main idea is, that - although financial services are characterized by a spread of "de-spatialized" forms of service production-, strategies of regional development based (at least partly) on endogenous resources can be supported by regional financial institutions. The argument will be presented in three steps: At first the importance of a regional exchange for regional development has to be discussed on a theoretical base. This part will draw upon notions and considerations of the "glocalization" literature which stresses the ambivalent relationship between processes of globalization and disembedding on the one hand and re-interpretation of different forms of proximity (including spatial proximity) on the other hand. A second - also rather theoretical - part will consider the possible comparative advantages of minor exchanges in the context of the prevailing concentration processes. This section will therefore focus on possible strategies, which combine the access to highly liquid and innovative exchanges and the special regional knowledge available at regional institutions. The chances and risks of different strategies (alliances with strong national and/or international partners vs. "niche production") have to be discussed. In the third section the empirical findings of the analysis of different minor German exchanges situated in metropolitan regions (Berlin, Hamburg, Munich) will be presented and assessed according to the arguments developed in the preceeding parts. The contextualization not only in respect to the specific regional economic situation but also in respect to the history of the German decentralized system of exchanges and the main trends of restructuring of the "European exchange landscape" will be essential to this last part.

Signaling Effects of Foreign Exchange Interventions and Expectation Heterogeneity among Traders

This paper explores whether official intervention signaling effects on short-run exchange rate movements depend on market conditions. We find evidence that announced interventions significantly affect the level and reduce the volatility of the yen/dollar rate when traders' expectations of future exchange rates are relatively heterogeneous. To compensate for the lack of daily exchange rate expectation survey data, we use implied volatility as a proxy since these are highly correlated. These results are consistent with predictions from the market microstructure models with asymmetric information across agents and the signaling hypothesis of foreign exchange interventions. Our findings indicate that the efficacy of intervention hinges not only on the firmness of signals but also on the degree of expectation heterogeneity among traders.Foreign exchange intervention, Announcements, Expectation heterogeneity

Everything you always wanted to know about wto accession (but were afraid to ask)

In this paper, the authors explore the complex, long, and unique process of accession to the World Trade Organization, with its intertwined economic, legal, and political dimensions. Referring to country case studies and sector-specific issues, the paper organizes some of the current reflections on the topic around three main themes. First, it explores the rationale of accession to the World Trade Organization: Why would new members join the WTO? And why would incumbent members let new members in? Second, it analyzes the World Trade Organization accession process in detail: What are the main characteristics and challenges of the accession process? Has it evolved over time, and how? Third, the paper looks at the implementation of World Trade Organization accession deals: Is accession the end or the beginning of the story? What are the implications for the participating countries and the multilateral trading system?World Trade Organization,Economic Theory&Research,Trade and Services,Trade Law,Debt Markets