Application of Simple Technical Trading Rules to Swiss Stock Prices: Is it Profitable?
AbstractThis paper tests if the use of simple technical trading rules on Swiss stock prices is profitable. It considers several trading rules based on the crossing of moving averages. The use of bands and oscillators such as the relative strength index or the stochastic indicator is also investigated. These rules are tested on daily returns of the Swiss Bank Corporation General Index for the period 1969-1997. It is found that the most profitable rule is a double moving average with averages computed on one and five days. With this rule, an annual average return on the SBC Index of 24.30% is obtained compared to a buy-and-hold annual return of 6.25%. These results are confirmed by bootstrap simulations which consider different return generating processes as the AR(1) model and the GARCH(1,1) model. Similar results are obtained for individual stocks. In the presence of trading costs, these rules are only profitable for a particular kind of investor.
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Bibliographic InfoPaper provided by International Center for Financial Asset Management and Engineering in its series FAME Research Paper Series with number rp2.
Date of creation: Jan 1999
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Moving average; investment strategy; technical analysis; bootstrap;
Other versions of this item:
- Isakov, D. & Hollistein, M., 1998. "Application of Simple Technical Trading Rules to Swiss Stock Prices: Is It Profitable?," Papers 98.2, Ecole des Hautes Etudes Commerciales, Universite de Geneve-.
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
- G19 - Financial Economics - - General Financial Markets - - - Other
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