Drivers of technical trend-following rules' profitability in world stock markets
Date
2013
Authors
Ülkü, N.
Prodan, E.
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Journal article
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International Review of Financial Analysis, 2013; 30:214-229
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Abstract
Testing short-horizon technical trend-following rules, including the first comprehensive evidence on the relatively-neglected MACD rule, on a large panel of world stock market indexes, we investigate the determinants of technical trading rule profitability. The main driver of trend-following rules' profitability is return persistence, which, in turn, is negatively related to market development. Return volatility adds to technical rule profitability. A new result is that the presence of an index futures market lowers profits to short-horizon trend-following rules after controlling for other indicators of market development. This may reflect the role of transaction costs as a friction retarding incorporation of information.
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Data source: Supplementary data, http://www.sciencedirect.com/science/article/pii/S1057521913001269#appd002
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Copyright 2013 Elsevier