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Drivers of technical trend-following rules' profitability in world stock markets

  • Ülkü, Numan
  • Prodan, Eugeniu

Testing short-horizon technical trend-following rules, including the first comprehensive evidence on the relatively-neglected MACD rule, on a large panel of world stock market indexes, we investigate the determinants of technical trading rule profitability. The main driver of trend-following rules' profitability is return persistence, which, in turn, is negatively related to market development. Return volatility adds to technical rule profitability. A new result is that the presence of an index futures market lowers profits to short-horizon trend-following rules after controlling for other indicators of market development. This may reflect the role of transaction costs as a friction retarding incorporation of information.

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Article provided by Elsevier in its journal International Review of Financial Analysis.

Volume (Year): 30 (2013)
Issue (Month): C ()
Pages: 214-229

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Handle: RePEc:eee:finana:v:30:y:2013:i:c:p:214-229
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620166

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