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How To Make A Profitable Trading Strategy More Profitable?

Author

Listed:
  • TERENCE TAI-LEUNG CHONG

    (Hong Kong Institute of Asia-Pacific Studies, The Chinese University of Hong Kong, Shatin, N. T., Hong Kong;
    Department of International Economics and Trade, Nanjing University, Jiangsu, 210044, China)

  • TAU-HING LAM

    (Department of Economics, The Chinese University of Hong Kong, Shatin, N. T., Hong Kong)

Abstract

Chong and Lam and Chonget al.show that SETAR(200) and MA(50) outperform other rules in both the U.S. and the Chinese stock market. This paper investigates the synergy of combining SETAR(200) and MA(50) rules in ten U.S. and Chinese stock market indexes. It is found that the SETAR rule performs better in the U.S. market, while the MA rule performs better in the Chinese market. In addition, we find evidence that a new strategy combining the two rules together is able to create synergy. An immediate implication of our result is that investors are able to improve the performance of their portfolios by combining existing profitable trading rules.

Suggested Citation

  • Terence Tai-Leung Chong & Tau-Hing Lam, 2013. "How To Make A Profitable Trading Strategy More Profitable?," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 58(03), pages 1-17.
    • Handle: RePEc:wsi:serxxx:v:58:y:2013:i:03:n:s0217590813500197
    DOI: 10.1142/S0217590813500197
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    Cited by:

    1. Tan, Siow-Hooi & Lai, Ming-Ming & Tey, Eng-Xin & Chong, Lee-Lee, 2020. "Testing the performance of technical analysis and sentiment-TAR trading rules in the Malaysian stock market," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).

    More about this item

    Keywords

    SETAR model; bootstrap; GARCH-M model; combined strategy; market efficiency; C22; G10; G12;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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