THE USE OF FUNDAMENTAL AND TECHNICAL ANALYSES BY FOREIGN-EXCHANGE DEALERS - HONG-KONG EVIDENCE

This article reports the results of a questionnaire survey conducted i n February 1995 on the use by foreign exchange dealers in Hong Kong of fundamental and technical analyses to form their forecasts of exchang e rate movements. Our findings reveal that > 85% of respondents rely o n both fundamental and technical analyses for predicting future rate m ovements at different time horizons. At shorter horizons, there exists a skew towards reliance on technical analysis as opposed to fundament al analysis, but the skew becomes steadily reversed as the length of h orizon considered is extended. Technical analysis is considered slight ly more useful in forecasting trends than fundamental analysis, but si gnificantly more useful in predicting turning points. Interest rate-re lated news is found to be a relatively important fundamental factor in exchange rate forecasting, while moving average and/or other trend-fo llowing systems are the most useful technical technique. (C) 1998 Else vier Science Ltd. All rights reserved.