Filter Rules: Follow the Trend, or Take the Contrarian Approach?

8 Pages Posted: 6 Nov 2010  

James Kozyra

Lakehead University

Camillo Lento

Lakehead University

Date Written: August 27, 2010

Abstract

This paper compares a trending approach to the filter trading rule against a contrarian approach. It is found that, after adjusting for transaction costs, the contrarian approach consistently outperforms the trending approach, and is able to earn returns in excess of the buy-and-hold trading strategy. The significance and robustness of the results are supported by a bootstrap simulation and sub-period analysis, respectively.

Keywords: Filter Rule, Market Efficiency, Contrarian Trading Strategy

JEL Classification: G14, G19, N22

Suggested Citation

Kozyra, James and Lento, Camillo, Filter Rules: Follow the Trend, or Take the Contrarian Approach? (August 27, 2010). Available at SSRN: https://ssrn.com/abstract=1703176 or http://dx.doi.org/10.2139/ssrn.1703176

James Kozyra

Lakehead University ( email )

955 Oliver Road
Thunder Bay, Ontario P7B 5E1
Canada

Camillo Lento (Contact Author)

Lakehead University ( email )

955 Oliver Road
Thunder Bay, Ontario P7B 5E1
Canada

Paper statistics

Downloads
596
Rank
35,222
Abstract Views
1,771