Connecting equity and foreign exchange markets through the WM “Fix”: a trading strategy

Arnav Sheth and Keisuke Teeple

Abstract

The authors examine the relationship between equity and foreign exchange markets at and around the WM/Reuters benchmark exchange rate known as the “Fix”. Execution at the Fix is a service offered by brokers, provided they obtain the trade order before 16:00 GMT. In this paper, the authors show the connection between equities and foreign
exchange markets via this window, they leverage this connection using an algorithmic trading strategy and rank various statistical techniques used to make predictions
for trading based on their investment results. The best technique produces an out-of-sample annual cumulative return of 4.02% and an annualized Sharpe ratio of 3.43.
This strategy is for illustration only.