When Buffett Meets Bollinger: An Integrated Approach to Fundamental and Technical Analysis

38 Pages Posted: 24 Feb 2019

See all articles by Zhaobo Zhu

Zhaobo Zhu

Shenzhen University; Audencia Business School

Licheng Sun

Old Dominion University

Date Written: August 7, 2018

Abstract

We study the portfolio performance of investment strategies that jointly apply both fundamental analysis and technical analysis. Compared with strategies that rely on one-dimensional fundamental or technical information, the integrated approach to fundamental and technical investing significantly improves portfolio performance. In addition, the joint strategies appear to perform better for stocks with higher idiosyncratic risks. We also find that when combined with fundamental signals, the Bollinger Bands, a reversal-type technical indicator, outperforms the moving average, which captures recent momentum in prices. Contrary to earlier findings from the literature, we show that moving average based strategies tend to incur higher volatility, lower Sharpe ratio, and larger tail risk. Our findings are consistent with the notion that, especially among small firms, the trading activities from investors with limited information capacity can lead to inefficient prices.

Keywords: Fundamental Analysis, Technical Analysis, Limited Investor Attention, Market Efficiency

JEL Classification: G11, G12, G14

Suggested Citation

Zhu, Zhaobo and Sun, Licheng, When Buffett Meets Bollinger: An Integrated Approach to Fundamental and Technical Analysis (August 7, 2018). Available at SSRN: https://ssrn.com/abstract=3330402 or http://dx.doi.org/10.2139/ssrn.3330402

Zhaobo Zhu (Contact Author)

Shenzhen University ( email )

3688 Nanhai Road, Nanshan District
Shenzhen, Guangdong 518060
China

Audencia Business School ( email )

8 Road Joneliere
BP 31222
Nantes Cedex 3, 44312
France

Licheng Sun

Old Dominion University ( email )

Strome College of Business
Department of Finance
Norfolk, VA 23529-0222
United States

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