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The Profitability Of Technical Trading Rules In Us Futures Markets: A Data Snooping Free Test

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  • Park, Cheol-Ho
  • Irwin, Scott H.

Abstract

Numerous empirical studies have investigated the profitability of technical trading rules in a wide variety of markets, and many of them found positive profits. Despite positive evidence about profitability and improvements in testing procedures, skepticism about technical trading profits remains widespread among academics mainly due to data snooping problems. This research tries to mitigate the problems by confirming the results of a previous study and then replicating the original testing procedure on new data. Results indicate that for various futures contracts and technical trading systems tested, technical trading profits have gradually declined over time. In general, substantial technical trading profits in the early 1980s are no longer available in the subsequent period.

Suggested Citation

  • Park, Cheol-Ho & Irwin, Scott H., 2004. "The Profitability Of Technical Trading Rules In Us Futures Markets: A Data Snooping Free Test," 2004 Conference, April 19-20, 2004, St. Louis, Missouri 19011, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    • Handle: RePEc:ags:ncrfou:19011
    DOI: 10.22004/ag.econ.19011
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    Cited by:

    1. Andrew Clare & James Seaton & Peter N Smith & Stephen Thomas, 2013. "Breaking into the blackbox: Trend following, stop losses and the frequency of trading – The case of the S&P500," Journal of Asset Management, Palgrave Macmillan, vol. 14(3), pages 182-194, June.
    2. Joni M. Klumpp & B. Wade Brorsen & Kim B. Anderson, 2008. "Market Advisory Service Recommendations and Wheat Producers' Selling Decisions," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 56(1), pages 117-128, March.
    3. repec:ags:jrapmc:122315 is not listed on IDEAS
    4. Dorfmann, Jeffrey & Karali, Berna, 2015. "A Nonparametric Search for Information Effects from USDA Reports," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 40(01), pages 1-20.
    5. Juan Carlos Ruilova & Pedro Alberto Morettin, 2020. "Parsimonious Heterogeneous ARCH Models for High Frequency Modeling," JRFM, MDPI, vol. 13(2), pages 1-19, February.
    6. Jasdeep S. Banga & B. Wade Brorsen, 2019. "Profitability of alternative methods of combining the signals from technical trading systems," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 26(1), pages 32-45, January.
    7. Szakmary, Andrew C. & Shen, Qian & Sharma, Subhash C., 2010. "Trend-following trading strategies in commodity futures: A re-examination," Journal of Banking & Finance, Elsevier, vol. 34(2), pages 409-426, February.
    8. Hesham I. Almujamed & Suzanne G. M. Fifield & David M. Power, 2018. "An Investigation of the Weak Form of the Efficient Markets Hypothesis for the Kuwait Stock Exchange," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 17(1), pages 1-28, April.
    9. Urcola, Hernan A. & Irwin, Scott H., 2006. "Has the Performance of the Hog Options Market Changed?," 2006 Annual meeting, July 23-26, Long Beach, CA 21479, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    10. Stephan Schulmeister, 2009. "Trading Practices and Price Dynamics in Commodity Markets and the Stabilising Effects of a Transaction Tax," WIFO Studies, WIFO, number 34919, August.
    11. Cheol‐Ho Park & Scott H. Irwin, 2010. "A reality check on technical trading rule profits in the U.S. futures markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 30(7), pages 633-659, July.
    12. Lehecka, Georg V., 2014. "The Value of USDA Crop Progress and Condition Information: Reactions of Corn and Soybean Futures Markets," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 39(01), pages 1-18, April.
    13. Karali, Berna, 2012. "Do USDA Announcements Affect Comovements Across Commodity Futures Returns?," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 37(01), pages 1-21, April.
    14. Benjamin R. Auer, 2021. "Have trend-following signals in commodity futures markets become less reliable in recent years?," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 35(4), pages 533-553, December.
    15. Lien, Donald & Yang, Li, 2008. "Asymmetric effect of basis on dynamic futures hedging: Empirical evidence from commodity markets," Journal of Banking & Finance, Elsevier, vol. 32(2), pages 187-198, February.
    16. Stephan Schulmeister, 2009. "Technical Trading and Trends in the Dollar-Euro Exchange Rate," WIFO Studies, WIFO, number 37582, August.
    17. Stephan Schulmeister, 2012. "Technical Trading and Commodity Price Fluctuations," WIFO Studies, WIFO, number 45238, August.
    18. Schulmeister, Stephan, 2009. "Profitability of technical stock trading: Has it moved from daily to intraday data?," Review of Financial Economics, Elsevier, vol. 18(4), pages 190-201, October.
    19. Osama El Ansary & Mona Atuea, 2017. "Testing the Effect of Technical Analysis Strategies on Achieving Abnormal Return: Evidence from Egyptian Stock Market," Accounting and Finance Research, Sciedu Press, vol. 6(2), pages 1-26, May.

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