Technical Analysis, Spread Trading and Data Snooping Control

70 Pages Posted: 8 Mar 2018 Last revised: 23 Jun 2020

See all articles by Ioannis Psaradellis

Ioannis Psaradellis

University of St Andrews School of Economics and Finance

Jason Laws

University of Liverpool - Accounting and Finance Division

Athanasios A. Pantelous

Monash University - Department of Econometrics & Business Statistics

Georgios Sermpinis

University of Glasgow

Date Written: June 17, 2020

Abstract

This paper utilizes a large universe of 18,410 technical trading rules (TTRs) and adopts a technique that controls for false discoveries to evaluate the performance of frequently traded spreads using daily data over 1990–2016. For the first time, the paper applies an excessive out-of-sample analysis in different subperiods across all TTRs examined. For commodity spreads, the evidence of significant predictability appears much stronger compared to equity and currency spreads. Out-of-sample performance of portfolios of significant rules typically exceeds transaction cost estimates and generates a Sharpe ratio of 3.67 in 2016. In general, we reject previous studies’ evidence of a uniformly monotonic downward trend in the selection of predictive TTRs over 1990–2016.

Keywords: Technical Trading Rules; Spread Trading Predictability; False Discovery Rate; Bootstrap Test; Portfolio Performance

JEL Classification: C12, C53, G11, G14, G15

Suggested Citation

Psaradellis, Ioannis and Laws, Jason and Pantelous, Athanasios A. and Sermpinis, Georgios, Technical Analysis, Spread Trading and Data Snooping Control (June 17, 2020). Available at SSRN: https://ssrn.com/abstract=3128788 or http://dx.doi.org/10.2139/ssrn.3128788

Ioannis Psaradellis (Contact Author)

University of St Andrews School of Economics and Finance ( email )

Castlecliffe, The Scores
St Andrews, KY16 9AR
United Kingdom

Jason Laws

University of Liverpool - Accounting and Finance Division ( email )

United Kingdom

Athanasios A. Pantelous

Monash University - Department of Econometrics & Business Statistics ( email )

Wellington Road
Clayton, Victoria 3168
Australia

Georgios Sermpinis

University of Glasgow ( email )

Adam Smith Business School
Glasgow, Scotland G12 8LE
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
735
Abstract Views
2,450
rank
36,964
PlumX Metrics