Revisiting the Profitability of Market Timing with Moving Averages

10 Pages Posted: 8 Mar 2016 Last revised: 15 Sep 2016

Valeriy Zakamulin

University of Agder - School of Business and Law

Date Written: August 25, 2016

Abstract

In a recent empirical study by Glabadanidis ("Market Timing With Moving Averages" (2015), International Review of Finance, Volume 15, Number 13, Pages 387-425; the paper is also available on the SSRN and has been downloaded more than 7,500 times) the author reports striking evidence of extraordinary good performance of the moving average trading strategy. In this paper we demonstrate that "too good to be true" reported performance of the moving average strategy is due to simulating the trading with look-ahead bias. We perform the simulations without look-ahead bias and report the true performance of the moving average strategy. We find that at best the performance of the moving average strategy is only marginally better than that of the corresponding buy-and-hold strategy. In statistical terms, the performance of the moving average strategy is indistinguishable from the performance of the buy-and-hold strategy. This paper is supplied with R code that allows every interested reader to reproduce the reported results.

Keywords: technical analysis, market timing, moving averages, performance evaluation

JEL Classification: G11, G17

Suggested Citation

Zakamulin, Valeriy, Revisiting the Profitability of Market Timing with Moving Averages (August 25, 2016). Available at SSRN: https://ssrn.com/abstract=2743119 or http://dx.doi.org/10.2139/ssrn.2743119

Valeriy Zakamulin (Contact Author)

University of Agder - School of Business and Law ( email )

Service Box 422
Kristiansand, N-4604
Norway
+47 38141039 (Phone)

HOME PAGE: http://vzakamulin.weebly.com/

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