Does History Repeat Itself In The Markets? by Alessandro Aldrovandi, Max Malandra, & Fabio Pacchioni
Seasonality or repeating patterns in financial data can come in many shapes and sizes and can put the probabilities on your side. Or does general market unpredictability ultimately undermine that edge? Here are some ideas on looking for time-based patterns and an example of how to backtest their reliability.
Is it possible to forecast market moves by using a “time factor”? Here, we’ll attempt to answer that question using monthly timeframes. For this study, we used the forex market and statistically analyzed historical monthly performances of some of the major currency pairs. We hypothesized that the major currencies vs. the US dollar, which is usually a mean-reverting relationship, could indicate seasonality in the different months of the year ...