| Publication type: | Contribution to magazine or newspaper |
| Title: | Momentum and trend following trading strategies for currencies revisited : combining academia and industry |
| Authors: | Rohrbach, Janick Suremann, Silvan Osterrieder, Jörg |
| DOI: | 10.2139/ssrn.2949379 |
| Published in: | International Finance eJournal |
| Volume(Issue): | 9 |
| Issue: | 72 |
| Issue Date: | Jun-2017 |
| Publisher / Ed. Institution: | Social Science Research Network |
| Language: | English |
| Subjects: | Momentum; Trading; Currency |
| Subject (DDC): | 332: Financial economics |
| Abstract: | Momentum trading strategies are thoroughly described in the academic literature and used in many trading strategies by hedge funds, asset managers, and proprietary traders. Baz et al. (2015) describe a momentum strategy for different asset classes in great detail from a practitioner’s point of view. Using a geometric Brownian Motion for the dynamics of the returns of financial instruments, we extensively explain the motivation and background behind each step of a momentum trading strategy. Constants and parameters that are used for the practical implementation are derived in a theoretical setting and deviations from those used in Baz et al. (2015) are shown. The trading signal is computed as a mixture of exponential moving averages with different time horizons. We give a statistical justification for the optimal selection of time horizons. Furthermore, we test our approach on global currency markets, including G10 currencies, emerging market currencies, and cryptocurrencies. Both a time series portfolio and a cross-sectional portfolio are considered. We find that the strategy works best for traditional fiat currencies when considering a time series based momentum strategy. For cryptocurrencies, a cross-sectional approach is more suitable. The momentum strategy exhibits higher Sharpe ratios for more volatile currencies. Thus, emerging market currencies and cryptocurrencies have better performances than the G10 currencies. This is the first comprehensive study showing both the underlying statistical reasons of how such trading strategies are constructed in the industry as well as empirical results using a large universe of currencies, including cryptocurrencies. |
| URI: | https://digitalcollection.zhaw.ch/handle/11475/15965 |
| Fulltext version: | Published version |
| License (according to publishing contract): | Licence according to publishing contract |
| Departement: | School of Engineering |
| Organisational Unit: | Institute of Data Analysis and Process Design (IDP) |
| Appears in collections: | Publikationen School of Engineering |
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Rohrbach, J., Suremann, S., & Osterrieder, J. (2017). Momentum and trend following trading strategies for currencies revisited : combining academia and industry. International Finance eJournal, 9(72). https://doi.org/10.2139/ssrn.2949379
Rohrbach, J., Suremann, S. and Osterrieder, J. (2017) ‘Momentum and trend following trading strategies for currencies revisited : combining academia and industry’, International Finance eJournal, 9(72). Available at: https://doi.org/10.2139/ssrn.2949379.
J. Rohrbach, S. Suremann, and J. Osterrieder, “Momentum and trend following trading strategies for currencies revisited : combining academia and industry,” International Finance eJournal, vol. 9, no. 72, Jun. 2017, doi: 10.2139/ssrn.2949379.
ROHRBACH, Janick, Silvan SUREMANN und Jörg OSTERRIEDER, 2017. Momentum and trend following trading strategies for currencies revisited : combining academia and industry. International Finance eJournal. Juni 2017. Bd. 9, Nr. 72. DOI 10.2139/ssrn.2949379
Rohrbach, Janick, Silvan Suremann, and Jörg Osterrieder. 2017. “Momentum and Trend Following Trading Strategies for Currencies Revisited : Combining Academia and Industry.” International Finance eJournal 9 (72). https://doi.org/10.2139/ssrn.2949379.
Rohrbach, Janick, et al. “Momentum and Trend Following Trading Strategies for Currencies Revisited : Combining Academia and Industry.” International Finance eJournal, vol. 9, no. 72, June 2017, https://doi.org/10.2139/ssrn.2949379.
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