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The profitability of Bollinger Bands: Evidence from the constituent stocks of Taiwan 50

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  • Ni, Yensen
  • Day, Min-Yuh
  • Huang, Paoyu
  • Yu, Shang-Ru

Abstract

We employ the constituent stocks of Taiwan 50 as our sample and explore if investors can beat the market by trading them as trading signals emitted by Bollinger Bands (BBs). Results reveal that investors might beat the market by taking long positions on stocks as share prices hit the lower BBs, as significantly shown in the positive abnormal returns. In addition, investors might also take the long positions instead of short positions when share prices reach the upper BBs. Thus, investors should employ momentum strategies instead of contrarian strategies while hitting upper BBs.

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  • Ni, Yensen & Day, Min-Yuh & Huang, Paoyu & Yu, Shang-Ru, 2020. "The profitability of Bollinger Bands: Evidence from the constituent stocks of Taiwan 50," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 551(C).
    • Handle: RePEc:eee:phsmap:v:551:y:2020:i:c:s0378437120300078
    DOI: 10.1016/j.physa.2020.124144
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    3. Gil Cohen, 2022. "Algorithmic Trading and Financial Forecasting Using Advanced Artificial Intelligence Methodologies," Mathematics, MDPI, vol. 10(18), pages 1-13, September.

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