Performance and Trading in Currency Markets- Thesis Essay

8175 Words Jun 3rd, 2016 33 Pages
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
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The primary goal of this thesis is to investigate and analyze the currency market. To this end, the study focuses on the performance of foreign exchange market, the behavior of currency traders, technical and fundamental analysis and how to overcome financial risks in the foreign exchange market.
1.1 Proposal
Technology is changing the way the outlook of the financial industry, as there has been a wave of digital disruption that is starting to reshape the sector taking market share away from the traditional banking sector. However, it is a little studied or understood sector. In this paper, we hope to address one of the up and coming Fintech disruptors.
Founded in 2007, Etoro has been touted as one of the 50 Best Fintech Innovators of 2014 and was designed to "financially empower individual investors" through its "pure innovative trading platform and an active Social Trading community." (KPMG, 2014).
The currency market is accessible than the capital markets. Do the investors in the platform receive an acceptable level of returns in comparison to other FX funds? If the return is of a good standard, does it return one which adequately compensate investors for the amount of risk taken since FX is considered a higher risk instrument?
The world of financial technology is relatively new and has yet to be uncovered, yet in this paper, using academic techniques we hope to reveal limitations of the currency managers and if they are profitable

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