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The anatomy of returns from moving average trading rules in the Russian stock market

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  • Eero Pätäri
  • Pasi Luukka
  • Elena Fedorova
  • Tatiana Garanina

Abstract

This paper examines the profitability of index trading strategies that are based on dual moving average crossover (DMAC) rules in the Russian stock market over the 2003–2012 period. It contributes to the existing technical analysis (TA) literature by comparing for the first time in emerging markets the relative performance of individual stocks’ trading portfolios with that of trading strategies for the index that consists of the same stocks (i.e., the most liquid stocks of the Moscow Exchange). The results show that the best trading strategies of the in-sample period can outperform buy-and-hold strategy during the subsequent out-of-sample period, although with low statistical significance. In addition, we document the benefits of using DMAC combinations that are much longer than those employed in previous TA literature. Moreover, the decomposition of the full-sample-period performance into separate bull- and bear-period performances shows that the outperformance of the best past index trading strategies over is mostly attributable to the fact that they managed to stay mostly out of the stock market during a dramatic crash caused by the global financial crisis.

Suggested Citation

  • Eero Pätäri & Pasi Luukka & Elena Fedorova & Tatiana Garanina, 2017. "The anatomy of returns from moving average trading rules in the Russian stock market," Applied Economics Letters, Taylor & Francis Journals, vol. 24(5), pages 311-318, March.
  • Handle: RePEc:taf:apeclt:v:24:y:2017:i:5:p:311-318
    DOI: 10.1080/13504851.2016.1186788
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