Fundamental Information in Technical Trading Strategies

Bonenkamp, Ute; Homburg, Carsten; Kempf, Alexander

doi:10.1111/j.1468-5957.2011.02252.x

Fundamental Information in Technical Trading Strategies

Journal of Business Finance & Accounting, Vol. 38, Issue 7‐8, pp. 842-860, 2011

19 Pages Posted: 13 Oct 2011

See all articles by Ute Bonenkamp

Ute Bonenkamp

University of Cologne - Department of Accounting

Alexander Kempf

University of Cologne - Department of Finance & Centre for Financial Research (CFR)

There are 2 versions of this paper

Date Written: September/October 2011

Abstract

Technical trading strategies assume that past price trends predict future ones. Their application may be profitable if the past trend reflects fundamental information that has not yet been fully priced. However, if the trend merely reflects temporary pricing pressures, technical trading will presumably fail. We argue that using financial statements as an additional source of information helps to avoid such failure. We implement a trading strategy that uses operating cash flows to identify enduring past price upturns. This strategy outperforms a purely technical momentum strategy, seems to be practicable, and its profits exceed transactions costs.

Keywords: momentum effect, market anomalies, trading strategies, technical trading, fundamental analysis

Suggested Citation: Suggested Citation

Bonenkamp, Ute and Homburg, Carsten and Kempf, Alexander, Fundamental Information in Technical Trading Strategies (September/October 2011). Journal of Business Finance & Accounting, Vol. 38, Issue 7‐8, pp. 842-860, 2011, Available at SSRN: https://ssrn.com/abstract=1943363 or http://dx.doi.org/10.1111/j.1468-5957.2011.02252.x