Are moving average trading rules profitable? Evidence from the European stock markets

Metghalchi, Massoud; Marcucci, Juri; Chang, Yung‐Ho

doi:10.1080/00036846.2010.543084

Cited by 73 publications

(31 citation statements)

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“…Individual and institutional investors often predict future prices with reference to technical indicators because these indicators are related to contrarian strategies based on the overreaction hypothesis or on the momentum strategy induced by excessive self-confidence. The effectiveness of moving average (MA) and other technical indicators has been confirmed by relevant studies, along with the informational content of trading rules (Bessembinder & Chan, 1995;Brock, Lakonishok, & LeBaron, 1992;Gençay, 1999;Gençay, Ballocchi, Dacorogna, Olsen, & Pictet, 2002;Gençay, Dacorogna, Olsen, & Pictet, 2003;Gençay & Stengos, 1997, 1998Lo, Mamaysky, & Wang, 2000;Metghalchia, Marcucci, & Chang, 2012;Ni, Lee, & Liao, 2013;Yu, Nartea, Gan, & Yao, 2013).…”

Section: Introductionmentioning

confidence: 80%

MA trading rules, herding behaviors, and stock market overreaction

Liao

Huang

2015

International Review of Economics & Finance

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Section: Introductionmentioning

confidence: 80%

MA trading rules, herding behaviors, and stock market overreaction

Liao

Huang

2015

International Review of Economics & Finance

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“…In their research, Metghalchi et al . () failed to reject that increasing moving average rules have forecasting ability, after correcting for data snooping bias, for 16 European stock markets. Shintani et al .…”

Section: Literature Reviewmentioning

confidence: 99%

Volume Information and the Profitability of Technical Trading

Chang

Chan

Chiang

2014

Asia-Pac J of Fin Stud

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Past studies have employed market indices to gauge the usefulness of technical trading, disclosing an enigma concerning the technical trading of individual stocks. We, for the first time, applied technical trading rules to each and every stock listed in an emerging equity market. We controlled the vast data set by share turnover that signifies trading volume information. Blending price and volume information, we observed that variable-length moving averages (VMAs) generally outperform the buy-and-hold strategy. VMAs, however, beat the equity market index only for less liquid stocks. Notably, the profitability of VMAs decreases with share turnover, indicating a possible liquidity effect on the profitability of technical trading.

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“…The numbers in parentheses refer to the lengths of shorter and longer MAs, respectively (e.g., IS(1,50)). Consistently with many previous studies (e.g., Brock et al, 1992;Ready, 2002;How et al, 2010;Metghalchi et al, 2012), we assume that a trader can have either a long position (buy days) or no position (sell days) in each stock (or the index). A buy (sell) signal is generated when the shorter MA rises above (or falls below) the longer MA.…”

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confidence: 93%

“…Following previous studies (e.g., Brock et al, 1992;Day and Wang, 2002;Cheung et al, 2011;Metghalchi et al, 2012), we first calculate the average return on both buy days and sell days and the resulting difference between the average buy day return and sell day return (henceforth buy-sell return) for each DMAC strategy and for both subperiods. 12 The average returns of buy and sell days are calculated as follows:…”

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confidence: 99%

Performance of moving average trading strategies over varying stock market conditions: the Finnish evidence

Pätäri

Vilska

2014

Applied Economics

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This article examines the profitability of dual moving average crossover (DMAC) trading strategies in the Finnish stock market over the period 1996 to 2012. It contributes to the existing technical analysis literature by comparing for the first time the performance of DMAC trading portfolios of individual stocks to the performance of index trading strategies based on trading on an index that consists of the same stocks. The results show that their relative performance varies over time, whereas previous studies have documented outperformance of index trading strategies over trading strategies of stock portfolios. Moreover, the great majority of 3020 DMAC strategies examined in this article outperform the corresponding buy-and-hold (B and H) strategy for both trading targets (i.e., OMX Helsinki 25 index and individual stocks included in the index) in out-ofsample tests. In addition, the decomposition of the full-sample-period performance into separate bull-and bear-period performance shows clearly that the outperformance of DMAC strategies over B and H strategy is mostly attributable to their better performance during bearish periods.

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Are moving average trading rules profitable? Evidence from the European stock markets

Cited by 73 publications

References 31 publications

MA trading rules, herding behaviors, and stock market overreaction

MA trading rules, herding behaviors, and stock market overreaction

Volume Information and the Profitability of Technical Trading

Performance of moving average trading strategies over varying stock market conditions: the Finnish evidence

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