|
|
|
|
||||
|
||||
Breaking into the Blackbox: Trend Following, Stop Losses, and the Frequency of Trading: The Case of the S&P500Steve ThomasCity University London - Sir John Cass Business School James SeatonCity University London - Sir John Cass Business School Andrew ClareCity University London - Sir John Cass Business School Peter N. SmithUniversity of York (UK) - Department of Economics and Related Studies; Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA) March 10, 2012 Abstract: In this paper we compare a variety of technical trading rules in the context of investing in the S&P500 index. These rules are increasingly popular both among retail investors and CTAs and similar investment funds. We find that a range of fairly simple rules, including the popular 200-day moving average trading rule, dominate the long only, passive investment in the index. In particular, using the latter rule we find that popular stop loss rules do not add value and that monthly end of month investment decision rules are superior to those which trade more frequently: this adds to the growing view that trading can damage your wealth. Finally we compare the MA rule with a variety of simple fundamental metrics and find the latter far inferior to the technical rules over the last 60 years of investing.
Number of Pages in PDF File: 19 Keywords: trend following, S&P500, stop losses, trading frequency, fundamental investment metrics JEL Classification: G10, G11, G12 working papers seriesDate posted: August 8, 2012Suggested CitationContact Information
|
|
||||||||||||||||||||||
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
FAQ
Terms of Use
Privacy Policy
Copyright
This page was processed by apollo7 in 0.422 seconds
