The Obstinate Passion of Foreign Exchange Professionals: Technical Analysis
Menkhoff, Lukas, and
Mark P. Taylor. 2007. "The Obstinate Passion of Foreign Exchange Professionals: Technical Analysis."
Journal of Economic Literature,
Technical analysis involves the prediction of asset price movements from inductive
analysis of past movements. We establish a number of stylized facts, including that
technical analysis is widespread in the foreign exchange market and that it may be
profitable. We then analyze four arguments that have been put forward to explain
this: that the market may not be fully rational; that technical analysis may exploit the
influence of official interventions; that it may be an efficient form of information processing;
and that it may inform on nonfundamental influences. While each may have
some validity, the latter is the most plausible.
Article Full-Text Access
Taylor, Mark P.
F31: Foreign Exchange
G15: International Financial Markets