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Tests of technical trading rules and the 52-week high strategy in the corporate bond market

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  • Montgomery, William
  • Raza, Ahmad
  • Ülkü, Numan

Abstract

This article presents the first tests of technical trend-following rules (TTRs) and the 52-week high strategy in individual corporate bonds, along with comparisons to corresponding stocks. Over the 2002–2015 period, TTR and the 52-week strategy are unprofitable in both bonds and stocks. Short legs of these trend-following strategies lead to significant losses in corporate bonds, which can be interpreted as evidence of bond investors' overreaction to bad news. Thus, short-term contrarian strategies, the profitability of which is viewed as the reward to liquidity provision, are more rewarding in corporate bonds. TTR buy signals can predict lower-volatility days in bonds as in stocks, despite the low/negative return correlations between the two.

Suggested Citation

  • Montgomery, William & Raza, Ahmad & Ülkü, Numan, 2019. "Tests of technical trading rules and the 52-week high strategy in the corporate bond market," Global Finance Journal, Elsevier, vol. 40(C), pages 85-103.
    • Handle: RePEc:eee:glofin:v:40:y:2019:i:c:p:85-103
    DOI: 10.1016/j.gfj.2018.01.018
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    More about this item

    Keywords

    Technical trend-following rules; The 52-week high momentum strategy; Corporate bonds;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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