Finance and Financial Management Commons^™

Trading Macro-Cycles Of Foreign Exchange Markets Using Hybrid Models, Joseph Z. B. Ling, Albert K. Tsui, Zhaoyong Zhang Prof

Research outputs 2014 to 2021

Most existing studies on forecasting exchange rates focus on predicting next-period returns. In contrast, this study takes the novel approach of forecasting and trading the longer-term trends (macro-cycles) of exchange rates. It proposes a unique hybrid forecast model consisting of linear regression, multilayer neural network, and combination models embedded with technical trading rules and economic fundamentals to predict the macro-cycles of the selected currencies and investigate the predicative power and market timing ability of the model. The results confirm that the combination model has a significant predictive power and market timing ability, and outperforms the benchmark models in terms of …