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The implementation of an adjusted relative strength index model in foreign currency and energy markets of emerging and developed economies

(Routledge, 2019) Gurrib, Ikhlaas ; Kamalov, Firuz

This study proposes refinements to some weaknesses in the Relative Strength Index (RSI) model and tests its predictability over pre and post crisis periods for the most active USD based currency pairs, including two energy markets. A new model (AdRSI) is tested using daily data over 2001–2015. Benchmarked against RSI and buy-and-hold models, findings support an inverse relationship between energy and currency markets. While energy markets had relatively higher risk, Chinese yuan had the lowest annualized risk. AdRSI produced higher annualized returns, lower number of trades and higher annualized risk. Overall, the buy-and-hold model was superior with higher reward-to-volatility. © 2019, © 2019 Informa UK Limited, trading as Taylor & Francis Group.