Should Ethical Traders Employ Technical Analysis?

41 Pages Posted: 12 Jul 2018

See all articles by Andrew Urquhart

Andrew Urquhart

ICMA Centre, Henley Business School

Hanxiong Zhang

Sheffield University Management School

Date Written: June 21, 2018

Abstract

This paper examines the performance of technical trading rules in Socially Responsible Investment (SRI) indices. Unlike previous studies, we separate technical trading rules into those that aim to trend-follow and those that employ mean-reversion. Using three popular FTSE4Good indices, we show that six traditional trend-following technical trading rules offer very little predictive power or significant returns to investors. However three mean-reversal technical trading rules do offer significant returns, even after controlling for data-snooping, risk, transaction costs and the out- of-sample testing. Therefore our results suggest that ethical traders should consider employing mean-reversal technical trading rules in their investment strategies.

Keywords: Socially Responsible Investments, Technical Analysis, Data-Snooping

JEL Classification: G1, G11

Suggested Citation

Urquhart, Andrew and Zhang, Hanxiong, Should Ethical Traders Employ Technical Analysis? (June 21, 2018). Available at SSRN: https://ssrn.com/abstract=3200440 or http://dx.doi.org/10.2139/ssrn.3200440

Andrew Urquhart (Contact Author)

ICMA Centre, Henley Business School ( email )

University of Reading
Whiteknights
Reading, Berkshire RG6 6BA
United Kingdom

Hanxiong Zhang

Sheffield University Management School ( email )

University of Sheffield
Conduit Road
Sheffield, S10 1FL
United Kingdom

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