Are technical trading strategies still profitable? Evidence from the Taiwan Stock Index Futures Market
This study is the first to use stochastic dominance theory to compare the performance of passive and active trading strategies for the Taiwan Stock Index Futures. In total, we test nine common trading strategies, including buy-and-hold (passive) and eight technical trading strategies (active). The results show that the Relative Strength Index (RSI) oscillator and parabolic strategies outperform the other technical trading strategies, and all of the eight technical trading strategies beat the buy-and-hold strategy both before and after transaction costs. In addition, investing a portion of investors’ money in risky assets and a portion in risk-free assets can help distinguish performance among the trading strategies. This implies that the stochastic dominance theory can help investors determine an optimal asset allocation.
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Volume (Year): 22 (2012)
Issue (Month): 12 (June)
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