exchangeratepart1(国际金融(香港大学,WONGKaF

1、1Forecasting exchange rate: part 1WONG Ka Fu10th January 20012If you are looking for awhite or black, or black & white cat, I am your perfect choice.3ContentzA taste of technical analysiszA taste of time-series forecastingzFundamental analysis: Factors that affect the movement of exchange rates4

2、A taste of technical analysis5Technical analysiszTechnical analysis is a method to forecast price movements of individual commodities and/or entire markets by looking at purely market-generated statistics-abstract summaries of price activity. 6Three tenets of technical analystszAll market fundamenta

3、ls are depicted in the actual market data.zHistory repeats itself.zPrices move in trends.71. All market fundamentals are depicted in the actual market data. zThus actual market fundamentals and various unquantifiable meta factors, such as the differing opinions, hopes, fears, and moods of market par

4、ticipants, need not be studied.82. History repeats itself.zHistory repeats itself, such that markets move in fairly predictable, or at least quantifiable, patterns. These patterns, generated by price movement, are called signals. The goal in technical analysis is to uncover the current markets signa

5、ls by examining past market signals.93. Prices move in trends zTechnicians typically do not believe that price fluctuations are random and unpredictable. (Most reject the weak-form explanation of market efficiency and dismiss the random walk theory.) Prices can move in one of three directions, up, d

6、own or sideways. Once a trend in any of these directions is in effect it usually will persist. A price chart will usually indicate the prevailing trend as characterized by a series of waves with obvious peaks and troughs. It is the direction of these peaks and troughs that constitutes the market tre

7、nd. Technical analysis attempts to determine the strength and direction of the trend and the change in the trend direction.10The building blocks of any technical analysis system includezPrice charts and zTechnical indicators, zBoth are merely mathematical representations of market patterns and behav

8、iors. zForecasting models usually include at least one type of indicator in relation to a particular type of price chart and look for divergence or continuity between indicators and price to determine the validity of a trend. 11Some of the price charts used in technical analysis:zChart patterns are

9、hills and valleys, shapes and curves that develop over time on a chart which often indicate changes in price direction. zCandlestick pattern are like bar charts patterns. It can be used to forecast the market. Because of their colored bodies, candlesticks visually represent greater detail in their c

10、hart patterns than bar charts.zPoint and figure patterns are essentially the same patterns found in bar charts but transposed on charts with no time scale1213Head and Shoulders are a reversal pattern consisting of three price peaks, the middle being the largest.Its potential in the opposite directio

11、n is measured by the distance from top of middle (head) to the base (neckline). This price distance is extrapolated from neckline at the point of breakout.14Double tops and double bottomsare reversal patterns consisting of two peaks with a price valley. To confirm pattern, prices must form a pullbac

12、k (decline below and close below previously established low). To predict move size, measure height from high to low and project under beltline (Vice versa for double bottom)15Flags and pennantsare continuation patterns, usually a pause in fast, or almost vertical, price movement. Flags are in the sh

13、ape of a parallelogram, while pennants are very short triangles.16Broadeningis a reversal pattern usually found at trend peaks rather than lows.17Trianglescan be continuation and reversal patterns, this usually determined by the direction which they point. Confirmation is at breakout, and the strong

14、est signals are when breakout occurs between 1/2 and 3/4 the triangle length. Ascending triangles: bullish Descending triangles: bearishSymmetrical triangles: neutral1819Saucersare reversal patterns which are slow and rounding in form (at the end of a move). No clear breakout signals occur because i

15、t is so slow; no clear Support /Resistance areas are found either. This pattern can last a long time. Be on the lookout for any trending activity.20Gapsare areas in charts where no trading occurs and are usually continuation patterns. Runaway gapshave strong fundamentals behind move, are not quickly

16、 filled.Exhaustion gapsare usually the largest gap, usually filled, and have blow-off characteristics.Breakaway gapsare at end of price pattern or when breaking major support ( or resistance), and are usually filled. 21Candle sticks22Point and Figure chartsIn a point and figure chart, Xs are for adv

17、ancing prices and 0s are for declining prices. When the market reverses direction by the defined amount, a new column starts to the right at the corresponding price level. If the price moves in either direction by less than the certain amount (the minimum interval), no new marks will be made, no mat

18、ter how much time passes. 23Some of the Technical indicators used in technical analysis:zTrend indicators smooth variable price data to create a composite of market direction.zMarket strength indicators describe the intensity of market opinion with reference to a price by examining the market positi

19、ons taken by various market participants.zVolatility indicators describe the size of day-to-day price fluctuations independent of their direction.zCycle indicators determine the timing of a particular market patterns.24Some of the Technical indicators used in technical analysis:zSupport and resistan

20、ce indicators describe the price levels where markets repeatedly reverse.zMomentum indicators determine the latent strength or weakness of a trend as it progresses over time. 25Interested in more technical analysis of financial data?26Technical traders in our simulation gamezBased on simple average

21、ruleszBuy Yen if the narrow window (n) moving average of Yen per USD is higher than its corresponding wide window (w) moving average.zLet MA(t,m) =p(t-1) + + p(t-m)/m zFor wn, the technical trading signal is ybuy if MA(t,n)MA(t,w)ysell if MA(t,n)MA(t,w)27A taste of forecasting281. Forecasting based

22、on past time-series datazTime-series model, ARMA(p,q):s(t) = a(0) + a(1)s(t-1) + + a(p)s(t-p) + e(t) + b(1)e(t-1) + + b(q)e(t-q)Based on a sample of T observations, s(1),s(T), estimate a(0), a(1), , a(p), b(1), , b(q).Es(t+1)|t = a(0) + a(1)s(t) + + a(p)s(t-p+1)29Other time-series modelszARIMA(p,I,q

23、)zARfiMA(p,d,q)zNeural NetworkszData-mining30Interested in forecasting?zECO3131: Applied Forecasting Methods (taught by Prof. CHOU Win Lin), mainly on linear time series. 312. Forecasting based on fundamentals and economic models zWe will revisit this topic near the end of this semester.zWe have to know the fundamentals that affect exchange rate before we can have a intelligent discussion. 32Factors that affect the movement of exchange rates331. Central ban