Market Timing with Moving Average Distance: International Evidence

46 Pages Posted: 18 Dec 2023

See all articles by Menachem (Meni) Abudy

Menachem (Meni) Abudy

Bar-Ilan University - Graduate School of Business Administration

Guy Kaplanski

Bar-Ilan University - Graduate School of Business Administration

Yevgeny Mugerman

Bar Ilan University

Date Written: December 4, 2023

Abstract

We explore the ability of the distance between short- and long-run moving averages, called MAD, to predict future returns of international market-wide indices. MAD portfolios yield abnormal profits after transaction costs, which do not reverse in the long run. This suggests that anchoring to long-run moving averages is a global phenomenon that applies also to market-wide indices. The annualized MAD portfolios' alpha values are double-digit with Sharpe ratios significantly higher than those of the global benchmarks. Similar results for developed economies and developed markets indicate that international diversification is still effective and offers significant economic benefits even among developed countries.

Keywords: moving average, anchoring, international markets, trading strategies, abnormal profits

JEL Classification: G11, G12, G15

Suggested Citation

Abudy, Menachem (Meni) and Kaplanski, Guy and Mugerman, Yevgeny, Market Timing with Moving Average Distance: International Evidence (December 4, 2023). Available at SSRN: https://ssrn.com/abstract=4652949 or http://dx.doi.org/10.2139/ssrn.4652949

Menachem (Meni) Abudy

Bar-Ilan University - Graduate School of Business Administration ( email )

Ramat Gan
Israel

Guy Kaplanski (Contact Author)

Bar-Ilan University - Graduate School of Business Administration ( email )

Ramat Gan
Israel

Yevgeny Mugerman

Bar Ilan University ( email )

Ramat Gan
5290002
Israel

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