Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/185567
Authors: 
Ilomäki, Jukka
Laurila, Hannu
McAleer, Michael
Year of Publication: 
2018
Series/Report no.: 
Tinbergen Institute Discussion Paper TI 2018-048/III
Abstract: 
Consider using the simple moving average (MA) rule of Gartley (1935) to determine when to buy stocks, and when to sell them and switch to the risk-free rate. In comparison, how might the performance be affected if the frequency is changed to the use of MA calculations? The empirical results show that, on average, the lower is the frequency, the higher are average daily returns, even though the volatility is virtually unchanged when the frequency is lower. The volatility from the highest to the lowest frequency is about 30% lower as compared with the buy-and-hold strategy volatility, but the average returns approach the buy-and-hold returns when frequency is lower. The 30% reduction in volatility appears if we invest randomly half the time in stock markets and half in the risk-free rate.
Subjects: 
Market timing
Moving averages
Risk-free rate
Returns and volatility
JEL: 
G32
C58
C22
C41
D23
Document Type: 
Working Paper
Social Media Mentions:

Files in This Item:
File
Size
845.34 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.