Abstract

http://ssrn.com/abstract=1656460
 
 

References (116)



 
 

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A New Anomaly: The Cross-Sectional Profitability of Technical Analysis


Yufeng Han


University of Colorado at Denver - Business School

Ke Yang


Washington University in Saint Louis

Guofu Zhou


Washington University in St. Louis - Olin School of Business

August 27, 2011


Abstract:     
In this paper, we document that an application of a moving average strategy of technical analysis to portfolios sorted by volatility generates investment timing portfolios that often outperform the buy-and-hold strategy substantially. For high volatility portfolios, the abnormal returns, relative to the CAPM and the Fama-French three-factor models, are high, and higher than those from the well known momentum strategy. The abnormal returns remain high even after accounting for transaction costs. Although both the moving average and the momentum strategies are trend-following methods, their performances are surprisingly uncorrelated and behave differently over the business cycles, default and liquidity risk.

Number of Pages in PDF File: 42

Keywords: Technical Analysis, Moving Average, Anomaly, Market Timing

JEL Classification: G11, G12, G14, C11, C61

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Date posted: August 12, 2010 ; Last revised: May 22, 2012

Suggested Citation

Han, Yufeng and Yang, Ke and Zhou, Guofu, A New Anomaly: The Cross-Sectional Profitability of Technical Analysis (August 27, 2011). Available at SSRN: http://ssrn.com/abstract=1656460 or http://dx.doi.org/10.2139/ssrn.1656460

Contact Information

Yufeng Han
University of Colorado at Denver - Business School ( email )
1475 Lawrence St.
Denver, CO 80204
United States
303-3158458 (Phone)
Ke Yang
Washington University in Saint Louis ( email )
Campus Box 1133
One Brookings Drive
Saint Louis, MO 63130-4899
United States
Guofu Zhou (Contact Author)
Washington University in St. Louis - Olin School of Business ( email )
Washington University
Campus Box 1133
St. Louis, MO 63130-4899
United States
314-935-6384 (Phone)
314-658-6359 (Fax)
HOME PAGE: http://apps.olin.wustl.edu/faculty/zhou/
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