Saturday, May 05, 2007

Recap: Australian dollar futures seasonal trade

Yesterday was the exit of the Australian dollar futures seasonal trade which I discussed in my premium content. It incurred a loss of $920 per contract, despite a 12-year winning streak previously. This may be the peril of a trade that is not based on any fundamental rationale that I know of, as well as an in-sample bias that I alluded to in my previous article. I will keep it on my watchlist for another year.

By the way, due to a technical glitch, my previous article on seasonality in commodities futures was not sent to many subscribers, so here is the link.


Anonymous said...

What test do you use for Cointegration? What sample time periods do you use for testing?
Are you applying a VEC type model?
I would like to verify some of your results, could you provide some details?

Ernie Chan said...

I use the augmented Dickey-Fuller test, no VEC model is used. On this blog, I typically use the entire history of the instruments as test period in order to obtain the best estimates of the parameters. For other details, please see the comments section of my various blog posts on cointegration, or email me.