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The Profitability of Moving Average Rules: Smaller Is Better in the Brazilian Stock Market

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  • José Luis Miralles-Quirós
  • María del Mar Miralles-Quirós
  • Luis Miguel Valente Gonçalves

Abstract

This study analyzes the effectiveness of using certain moving average rules in the most important emerging market of Latin America: Brazil. Using different MSCI indices, we find that the best performance is provided by the MSCI Brazil Small Cap Index, which tracks the small cap segment of the Brazilian stock market, as opposed to the MSCI Brazil Index which measures the performance of large and medium firms and has been the main reference for the Brazilian stock market in previous empirical evidence. Additionally, we report clear evidence of the existence of a size effect in the Brazilian stock market due to the superior performance of the index which tracks the smaller companies over those which track larger companies. These results restate the importance of in-depth knowledge of stock market patterns in order to develop correct trading strategies in each case.

Suggested Citation

  • José Luis Miralles-Quirós & María del Mar Miralles-Quirós & Luis Miguel Valente Gonçalves, 2019. "The Profitability of Moving Average Rules: Smaller Is Better in the Brazilian Stock Market," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 55(1), pages 150-167, January.
    • Handle: RePEc:mes:emfitr:v:55:y:2019:i:1:p:150-167
    DOI: 10.1080/1540496X.2017.1422428
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    Cited by:

    1. Bley, Jorg & Saad, Mohsen, 2020. "An analysis of technical trading rules: The case of MENA markets," Finance Research Letters, Elsevier, vol. 33(C).

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