An Anatomy of Returns From Moving Average Trading Rules in the Russian Stock Market

Applied Economics Letters (2017), Vol. 24 No. 5, pp. 311-318.

15 Pages Posted: 5 Dec 2019

See all articles by Eero Pätäri

Eero Pätäri

American University of Sharjah - School of Business and Management

Pasi Luukka

Lappeenranta University of Technology (LUT)

Elena Fedorova

Lappeenranta University of Technology, School of Business

Tatiana Garanina

Vaasan yliopisto (University of Vaasa); Saint Petersburg State University

Date Written: August 27, 2016

Abstract

This paper examines the profitability of index trading strategies that are based on dual moving average crossover (DMAC) rules in the Russian stock market over the 2003–2012 period. It contributes to the existing technical analysis (TA) literature by comparing for the first time in emerging markets the relative performance of individual stocks’ trading portfolios to that of trading strategies for the MICEX index that consists of the same stocks (i.e., the most liquid stocks of the Moscow Exchange).

The results show that the best trading strategies of the in-sample period can outperform their benchmark portfolios during the subsequent out-of-sample period, though the statistical significance of the outperformance is at its best weak. In addition, evidence of the benefits from using DMAC combinations that are much longer than those employed in previous TA literature is found. Moreover, the decomposition of the full-sample-period performance into separate bull- and bear-period performance shows that the outperformance of the best past index trading strategies over buy-and-hold strategy is mostly attributable to the fact that they managed to stay mostly out of the stock market during a huge crash caused by the global financial crisis.

Keywords: Technical analysis, Moving average, Ordered weighted average, Emerging Markets, Trading rules, Index trading, Market efficiency

JEL Classification: G11, G14, G17

Suggested Citation

Pätäri, Eero and Luukka, Pasi and Fedorova, Elena and Garanina, Tatiana, An Anatomy of Returns From Moving Average Trading Rules in the Russian Stock Market (August 27, 2016). Applied Economics Letters (2017), Vol. 24 No. 5, pp. 311-318., Available at SSRN: https://ssrn.com/abstract=3490474

Eero Pätäri (Contact Author)

American University of Sharjah - School of Business and Management ( email )

P.O. Box 26666
Sharjah
United Arab Emirates

Pasi Luukka

Lappeenranta University of Technology (LUT) ( email )

Lappeenranta
Finland

Elena Fedorova

Lappeenranta University of Technology, School of Business ( email )

P.O. Box 20
Lappeenranta, 53851
Finland
+358503226538 (Phone)
+358294463246 (Fax)

HOME PAGE: http://www.lut.fi/

Tatiana Garanina

Vaasan yliopisto (University of Vaasa) ( email )

P.O. Box 700
P.O. Box 700
Vaasa, FI-65101
Finland

Saint Petersburg State University ( email )

7-9, Universitetskaya nab.
Saint Petersburg, 199034
Russia

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