Can technical oscillators outperform the buy and hold strategy?
- 16 February 2015
- journal article
- research article
- Published by Taylor & Francis Ltd in Applied Economics
Abstract
This study compares returns from the traditional buy and hold (B&H) strategy to well-known technical oscillators applied to diverse indices leading the global market (DJI, FTSE, NK225 and TA100) during the period 2007–2012. Our aim was to establish whether technical tools can consistently achieve returns exceeding those of the B&H strategy across various financial markets. We found the relative strength index (RSI) to be the best oscillator, outperforming the DJIA, the FTSE100 and the NK225 for five of the six years examined. The only index that did better than the RSI was TA100, which outperformed all the examined oscillators. In second place was the moving average convergence/divergence (MACD) oscillator, which outperformed the NK225 B&H strategy and came in second for TA100. The results show that during bear markets the RSI and MACD generally produce better gains than the indices, while the opposite occurs during bull markets.Keywords
This publication has 10 references indexed in Scilit:
- Value and Momentum EverywhereThe Journal of Finance, 2013
- Intertemporal profitability and the stability of technical analysis: evidences from the Hong Kong stock exchangeApplied Economics, 2011
- Testing the predictive ability of technical analysis using a new stepwise test without data snooping biasJournal of Empirical Finance, 2010
- Is technical analysis profitable on US stocks with certain size, liquidity or industry characteristics?Applied Financial Economics, 2009
- WHAT DO WE KNOW ABOUT THE PROFITABILITY OF TECHNICAL ANALYSIS?Journal of Economic Surveys, 2007
- An analysis of trading strategies in eleven European stock marketsThe European Journal of Finance, 2005
- The Efficient Market Hypothesis and Its CriticsJournal of Economic Perspectives, 2003
- Technical trading strategies and return predictability: NYSEApplied Financial Economics, 2002
- Market Timing: Better Than a Buy-and-Hold StrategyCFA Magazine, 1992
- Permanent and Temporary Components of Stock PricesJournal of Political Economy, 1988