TY - JOUR
T1 - Asymmetric return dynamics and technical trading strategies
AU - Nam, Kiseok
AU - Washer, Kenneth M.
AU - Chu, Quentin C.
N1 - Funding Information:
The authors are grateful to Giorgio P. Szegö (the Managing Editor), two anonymous referees, and participants at the Financial Management Association meeting 2003 for their helpful comments. We also thank Priti Verma and Jorge Vidal for research assistance. Kiseok Nam acknowledges the FRC grant from the University of Texas – Pan American.
Copyright:
Copyright 2004 Elsevier B.V., All rights reserved.
PY - 2005/2
Y1 - 2005/2
N2 - We investigate the profitability of technical trading strategies based on an asymmetric reverting property of stock returns. We identify an asymmetry in return dynamics for daily returns on the S&P 500 index. Return dynamics evolve along a positive (negative) unconditional mean after a prior positive (negative) return. The trading strategies based on this asymmetry generate a positive return for buy signals, a negative return for sell signals, and a positive return for the spread between buy and sell signals. Our results imply that the observed asymmetry in return dynamics is the main source of profitability for the implied strategies, thereby corroborating arguments for the usefulness of technical trading strategies.
AB - We investigate the profitability of technical trading strategies based on an asymmetric reverting property of stock returns. We identify an asymmetry in return dynamics for daily returns on the S&P 500 index. Return dynamics evolve along a positive (negative) unconditional mean after a prior positive (negative) return. The trading strategies based on this asymmetry generate a positive return for buy signals, a negative return for sell signals, and a positive return for the spread between buy and sell signals. Our results imply that the observed asymmetry in return dynamics is the main source of profitability for the implied strategies, thereby corroborating arguments for the usefulness of technical trading strategies.
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U2 - 10.1016/j.jbankfin.2004.05.012
DO - 10.1016/j.jbankfin.2004.05.012
M3 - Article
AN - SCOPUS:10244264632
VL - 29
SP - 391
EP - 418
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
SN - 0378-4266
IS - 2
ER -