Profits from Technical Trading Rules
AbstractI examine the predictability of daily returns for the Dow Jones Industrial Average by comparing the technical trading rules developed by Allen and Karjalainen (1999) with moving average rules studied by Brock, Lakonishok, and LeBaron (1992). I argue that this comparison lends support to the hypothesis that the apparent success (after transaction costs) of the Brock et al. (1992) moving average rules is a spurious result of data snooping. If it were reliable, investors would like to use technical analysis to improve their portfolio returns, and firms would like to use it to improve the timing of their security offerings. My results serve as a reminder that patterns in historical data, even though they appear very consistent, need not persist in the future.
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Bibliographic InfoArticle provided by Financial Management Association in its journal Financial Management.
Volume (Year): 31 (2002)
Issue (Month): 3 (Fall)
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