Revisiting the Profitability of Market Timing with Moving Averages

11 Pages Posted: 5 Jun 2018

See all articles by Valeriy Zakamulin

Valeriy Zakamulin

University of Agder - School of Business and Law

Multiple version iconThere are 2 versions of this paper

Date Written: June 2018

Abstract

In a recent empirical study by Glabadanidis (“Market Timing with Moving Averages” (2015), International Review of Finance 15(13):387–425), the author reports striking evidence of extraordinarily good performance of the moving average trading strategy. In this paper, we demonstrate that this “too good to be true” reported performance of the moving average strategy is due to simulating trading with look‐ahead bias. We perform 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.

Suggested Citation

Zakamulin, Valeriy, Revisiting the Profitability of Market Timing with Moving Averages (June 2018). International Review of Finance, Vol. 18, Issue 2, pp. 317-327, 2018. Available at SSRN: https://ssrn.com/abstract=3189116 or http://dx.doi.org/10.1111/irfi.12132

Valeriy Zakamulin (Contact Author)

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

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Kristiansand, N-4604
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