A Comprehensive Test of Futures Market Disequilibrium
Whether or not trading with technical analysis is profitable is a controversial topic. This study seeks to add to our knowledge about this controversy by providing a comprehensive test of the profitability of technical trading systems. Trading is simulated for 23 trading systems on 30 futures markets for 11 years. All but two trading systems had significant gross returns. Thus, the results strongly reject the random walk model and suggest that disequilibrium models more appropriately describe daily futures prices. Although returns were less than expected by many users of these systems, several systems did generate returns significantly above transaction costs. The results for net returns are not conclusive, but they suggest there may be causes of disequilibrium beyond transaction costs. No conclusion is made about market efficiency since possible causes of disequilibrium beyond transaction costs exist. Copyright 1990 by MIT Press.
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Volume (Year): 25 (1990)
Issue (Month): 4 (November)
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