We use the pattern recognition algorithm of Lo, Mamaysky, and Wang () with some modifications to determine whether head-and-shoulders (HS) price patterns have predictive power for future stock returns. The modifications include the use of filters based on typical price patterns identified by a...

This paper is one of four in this Working Paper Series, focusing on financial liberalisation, along with those of Kupiec, Driscoll and Blundell-Wignall and Browne. It surveys recent work, both theoretical and empirical, on the question of market efficiency in various asset markets. A number of...

While many technical trading rules are based upon patterns in asset prices, we lack convincing explanations of how and why these patterns arise, and why trading rules based on technical analysis are profitable. This paper provides a model that explains the success of certain trading rules that...

The following is a description of the paper and not the actual abstract. We assume that the central bank has been given a mandate to stabilize its exchange rate around a target, an objective it has to meet by trading against risk-averse speculators who have private information about future spot...

It is a robust finding that technical trading rules applied to foreign exchange markets have earned substantial excess returns over long periods of time. However, the approach to risk adjustment has typically been rather cursory, and has tended to focus on the CAPM. We examine the returns to a...