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Performance and Trading in Currency Markets- Thesis

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Performance and Trading In Currency Markets

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Table of Contents 1.0 Introduction 4 1.1 Proposal 4 1.2 Research Questions 5 2.0 Literature review 5
2.1 Traditional Portfolio Measures …………………………………………………………….6 a. Sharpe ratio: 6 b. Treynor ratio: 7 c. Jensen Alpha: 8 d. Fama-French Model 10
2.2 Assumption to Models ……………………………………………………………………11
2.3 Possible Results ……………………………………………………………………………11
2.4 Limitations of the traditional models ……………………………………………………12 3.0 Academic Review 14
3.1 Types of Analysis Applied in Currency Markets ……………………………………14
3.2 Empirical Literature Review ……………………………………………………………17
3.2.1 Hedging in the Currency Market ……………………………………………………19
4.0 Individual Currency Index Returns ……………………………………………………20
4.1.1 The Factors ……………………………………………………………………………21 a. Trend 21 b. Value 22 c. Volatility 22
4.2 Individual Currency Manager Returns ……………………………………………………23
5.0 Limitation to study ……………………………………………………………………25
6.0 Critique of Data source ……………………………………………………………………26
7.0 Results From Previous studies ……………………………………………………………29 8.0 Conclusion 30 References List 31

Performance and Trading In Currency Markets
1.0 Introduction
The financial money market or the currency market is one of the markets that reports high trading volume. Most investors are keen in the trends of financial markets both from a local and an international perspective (Fanchiotti, Canal, & Zúñiga,2002).Financial traders consider past information to establish the future movements of currency and the behavior of currency markets. Foreign exchange portfolios are some of the most viable investments (Mizen, 2003). Nevertheless, investors need to take precaution as they can accrue massive losses because of currency exchange exposures. To this end, investors can trade in

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