Can risk explain the profitability of technical trading in currency markets?

Academic studies show that technical trading rules would have earned substantial excess returns over long periods in foreign exchange markets. However, the approach to risk adjustment has typically been rather cursory. We examine ability of a wide range models: CAPM, quadratic downside Carhart’s 4-factor model, C-CAPM, an extended C-CAPM with durable consumption, Lustig-Verdelhan (LV) carry-trade factor and models including macroeconomic factors, volatility, skewness liquidity, explain these returns. No model plausibly accounts for much profitability. This failure implicitly supports non-risk based explanations such as adaptive