Using Simple Technical Analysis Indicators for Asset Allocation Decisions

13 Pages Posted: 9 Jan 2021

See all articles by Bryan Foltice

Bryan Foltice

Butler University - Lacy School of Business

Steven D. Dolvin

Butler University

Date Written: April 18, 2020

Abstract

This study analyzes the potential effectiveness of using simple technical analysis indicators to determine the overall riskiness of portfolio asset allocation. Using the 200-day simple moving average of the S&P500 as our technical indicator in two separate strategies, we employ a “risk-on” asset allocation strategy (more portfolio allocation in stocks as a percentage) when the S&P500 is above the indicator line and a “risk-off” strategy (less stock/more bond allocation) when below. We compare the “buy and hold” returns of various portfolio allocations in the U.S. stock and bond markets from 1962-2017. In the initial analysis, we find that following this rule with the 200-day simple moving average provides excess annual returns of up to 0.59%, with all analyzed allocation combinations posting both excess returns and a reduction in overall risk for all analyzed allocation combinations, with all 200-day strategies posting an increase in Sharpe ratios when compared to their baseline “buy-and-hold” strategy.

Keywords: technical analysis, trading strategies, simple moving average

JEL Classification: G11, G02, G14

Suggested Citation

Foltice, Bryan and Dolvin, Steven D., Using Simple Technical Analysis Indicators for Asset Allocation Decisions (April 18, 2020). Available at SSRN: https://ssrn.com/abstract=3732822 or http://dx.doi.org/10.2139/ssrn.3732822

Bryan Foltice (Contact Author)

Butler University - Lacy School of Business ( email )

Indianapolis, IN 46208
United States

Steven D. Dolvin

Butler University ( email )

4600 Sunset Avenue
Indianapolis, IN 46208
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
73
Abstract Views
314
rank
385,175
PlumX Metrics