An improved moving average technical trading rule

Papailias, Fotis; Thomakos, Dimitrios D.

doi:10.1016/j.physa.2015.01.088

Cited by 26 publications

(17 citation statements)

References 14 publications

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“…We are sure that given the simplicity of our strategy, the investor should do much better. See, for instance, the work of [63] for examples of other rules. What remains an open question is whether the same underlying mechanism presented in Equation 5, Equation 8 and model 13 is relevant for the many different rules and strategies proposed in the literature.…”

Section: Empirical Non-stationary Analysismentioning

confidence: 99%

“…Time-series momentum rules are very close in nature to trend-following rules. While trend-following rules may involve prices [49,63], time-series momentum ones look at past price returns. In summary, time-series momentum can be equated with the study of the simplest trend following strategies, and therefore a building block for more complex strategies.…”

Section: Introductionmentioning

confidence: 99%

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Detailed study of a moving average trading rule

Ferreira

Silva²,

Yen

2018

Quantitative Finance

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We present a detailed study of the performance of a trading rule that uses moving average of past returns to predict future returns on stock indexes. Our main goal is to link performance and the stochastic process of the traded asset. Our study reports short, medium and long term effects by looking at the Sharpe ratio (SR). We calculate the Sharpe ratio of our trading rule as a function of the probability distribution function of the underlying traded asset and compare it with data. We show that if the performance is mainly due to presence of autocorrelation in the returns of the traded assets, the SR as a function of the portfolio formation period (look-back) is very different from performance due to the drift (average return). The SR shows that for look-back periods of a few months the investor is more likely to tap into autocorrelation. However, for look-back larger than few months, the drift of the asset becomes progressively more important. Finally, our empirical work reports a new long-term effect, namely oscillation of the SR and propose a non-stationary model to account for such oscillations. * ferfff@usp.br † csilva@idatafactory.com ‡ ju-yi.yen@uc.edu 1 Cross-sectional momentum is not the focus of this article, but it has been studied extensively if compared to time-series momentum or trend-following. Since the work of [41], momentum has been extended to different asset classes, portfolios, and other markets abroad. Momentum has been reported in international equity markets by [22,28,62,65]; in industries by [50,60]; in indexes by [8,2]; and in commodities by [24,61]. Single risky asset momentum is analyzed in [21,5,39,7,44,1,52,66] to cite a few. Recently, momentum has also been studied linking its performance to business cycles and regimes by [16,46,33,35,6]. arXiv:1907.00212v1 [q-fin.ST]

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Section: Empirical Non-stationary Analysismentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Detailed study of a moving average trading rule

Ferreira

Silva²,

Yen

2018

Quantitative Finance

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“…The methodology in [1] has been applied in two energy ETFs: (i) XLE and (ii) IYE. Evidence has been found that strategies, which trade using entry and exit signal by this improved moving average methodology work well in energy markets and result in higher cumulative returns with lower drawdowns compared to the strategies that use signals issued by the standard moving average methodologies.…”

Section: Discussionmentioning

confidence: 99%

“…The above strategies are modified in a simple and intuitive way in [1], [12] and [13]. Initially, a trade is entered when one of the standard methods indicates a 'buy' signal.…”

Section: Trading Strategiesmentioning

confidence: 99%

TRADING ENERGY ETFs WITH AN IMPROVED MOVING AVERAGE STRATEGY

Papailias¹,

Thomakos²

2013

Int. J. Energy Stat.

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In this paper, the recently introduced improved moving average methodology in [1] is employed and it is applied in two energy ETFs. It is compared to the standard moving average methodology and the buy and hold strategy. Investors who are interested in energy-related sectors and trade using averages, could benefit by forming their strategies based on this improved moving average methodology as it returns higher profits accompanied by decreased risk (measured in terms of drawdown).

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“…Asset selection, from a broader universe of available assets, falls into the market-timing approach which can be based on fundamental analysis or quantitative (even technical) analysis (for technical trading systems, such as the use of moving averages, see among others [1][2][3][4][5][6][7][8][9][10][11]). In this paper we consider the 'momentum effect', a particular type of quantitative investment strategy that has been greatly explored in finance literature but not so in the context of energy stocks.…”

Section: Introductionmentioning

confidence: 99%

Momentum Trading in New York Stock Exchange (Nyse) Energy Stocks

Thomakos

Papailias²

2013

Int. J. Energy Stat.

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This paper investigates whether the momentum effect exists in the NYSE energy sector. Momentum is defined as the strategy that buys (sells) these stocks that are best (worst) performers, over a pre-specified past period of time (the 'look-back' period), by constructing equally weighted portfolios. Different momentum strategies are obtained by changing the number of stocks included in these portfolios, as well as the look-back period. Next, their performance is compared against two benchmarks: the equally weighted portfolio consisting of most stocks in the NYSE energy index and the market portfolio, and the S&P500 index. The results indicate that the momentum effect is strongly present in the energy sector, and leads to highly profitable portfolios, improving the risk-reward measures and easily outperforming both benchmarks.

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An improved moving average technical trading rule

Cited by 26 publications

References 14 publications

Detailed study of a moving average trading rule

Detailed study of a moving average trading rule

TRADING ENERGY ETFs WITH AN IMPROVED MOVING AVERAGE STRATEGY

Momentum Trading in New York Stock Exchange (Nyse) Energy Stocks

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