Abstract
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.
| Original language | English |
|---|---|
| Pages (from-to) | 391-418 |
| Number of pages | 28 |
| Journal | Journal of Banking and Finance |
| Volume | 29 |
| Issue number | 2 |
| DOIs | |
| State | Published - Feb 2005 |
| Externally published | Yes |
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All Science Journal Classification (ASJC) codes
- Economics and Econometrics
- Finance
Cite this
Asymmetric return dynamics and technical trading strategies. / Nam, Kiseok; Washer, Kenneth M.; Chu, Quentin C.
In: Journal of Banking and Finance, Vol. 29, No. 2, 02.2005, p. 391-418.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Asymmetric return dynamics and technical trading strategies
AU - Nam, Kiseok
AU - Washer, Kenneth M.
AU - Chu, Quentin C.
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.
UR - http://www.scopus.com/inward/record.url?scp=10244264632&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=10244264632&partnerID=8YFLogxK
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 -