The Rise and Fall of Technical Trading Rule Success

46 Pages Posted: 18 Jan 2013 Last revised: 2 Nov 2016

See all articles by Nicholas Taylor

Nicholas Taylor

University of Bristol - School of Economics, Finance and Management

Date Written: January 30, 2013

Abstract

The purpose of this paper is to examine the performance of an important set of momentum-based technical trading rules (TTRs) applied to all members of the Dow Jones Industrial Average (DJIA) stock index over the period 1928 to 2012. Using a set of econometric models that permit time-variation in risk-adjusted returns to TTR portfolios, the results reveal that profits evolve slowly over time, are confined to particular episodes primarily from the mid-1960s to mid-1980s, and rely on the ability of investors to short-sell stocks. These findings are demonstrated to be consistent with theoretical models that predict a relationship between TTR performance and market conditions.

Keywords: Technical trading rules, short-selling, market conditions

JEL Classification: C32,C53, G11, G14

Suggested Citation

Taylor, Nicholas, The Rise and Fall of Technical Trading Rule Success (January 30, 2013). Journal of Banking and Finance, 2014. Available at SSRN: https://ssrn.com/abstract=2202466 or http://dx.doi.org/10.2139/ssrn.2202466

Nicholas Taylor (Contact Author)

University of Bristol - School of Economics, Finance and Management ( email )

United Kingdom

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