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Type: Journal article
Title: Market timing with moving averages
Author: Glabadanidis, P.
Citation: International Review of Finance, 2015; 15(3):387-425
Publisher: Wiley
Issue Date: 2015
ISSN: 1369-412X
Statement of
Paskalis Glabadanidis
Abstract: I present evidence that a moving average (MA) trading strategy has a greater average return and skewness as well as a lower variance compared to buying and holding the underlying asset using monthly returns of value-weighted US decile portfolios sorted by market size, book-to-market, and momentum, and seven international markets as well as 18,000 individual US stocks. The MA strategy generates risk-adjusted returns of 3–7% per year after transaction costs. The performance of the MA strategy is driven largely by the volatility of stock returns and resembles the payoffs of an at-the-money protective put on the underlying buy-and-hold return. Conditional factor models with macroeconomic variables, especially the default premium, can explain some of the abnormal returns. Standard market timing tests reveal ample evidence regarding the timing ability of the MA strategy.
Keywords: G11; G12; G14
Rights: © 2015 International Review of Finance Ltd. 2015
RMID: 0030035029
DOI: 10.1111/irfi.12052
Appears in Collections:Economics publications

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