Abstract
This chapter tests the profitability of various moving average trading rules in different financial markets: stocks, bonds, currencies, and commodities. The results of these tests allow us to better understand the properties of the moving average trading strategies and find out which trading rules are profitable in which markets. The chapter concludes with a few practical recommendations for traders testing the profitability of moving average trading rules. The analysis presented in this chapter also suggests a hypothesis about simultaneous existence, in the same financial market, of several trends with different durations.
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Notes
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- 4.
The data are provided by Robert Shiller http://www.econ.yale.edu/~shiller/data.htm. Alternatively, these data can also be downloaded from https://www.measuringworth.com.
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These yields are proxies for the risk-free interest rates for the U.S. and six other countries.
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The data for this plot are also obtained from the FRED database.
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The futures price converges to the spot price as the delivery date of the contract approaches, see any textbook on derivative securities, for example, Hull (2014).
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However, if a sample is rather short, the estimate for b(k) is downward biased. Therefore, even if asset prices follow a random walk, in short samples \(b(k)<0\) and decreases as k increases.
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Zakamulin, V. (2017). Trading in Other Financial Markets. In: Market Timing with Moving Averages. New Developments in Quantitative Trading and Investment. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-60970-6_10
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DOI: https://doi.org/10.1007/978-3-319-60970-6_10
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