The performance of moving average rules in emerging stock markets

S. G. M. Fifield, D. M. Power, D. G. S. Knipe

Research output: Contribution to journalArticle

13 Citations (Scopus)

Abstract

The question of whether active trading strategies outperform the more naive approaches that are available to investors has returned to the research agenda. The topic had been hotly debated in the early and middle 1960s, but seemed to have been dispatched to the academic sidelines by proponents of the Efficient Market Hypothesis (EMH). However, the developments in behavioural finance which recognize that individuals may make mistakes when valuing securities have revived interest in this topic. In addition, recent evidence has re-ignited the debate and there is now a new strand of literature which re-examines whether trading strategies based on historic information can yield profits. The current article builds on this recent body of evidence by examining moving average rules for 15 emerging and three developed markets over the period 1989-2003. The results indicate that the return behaviour of the emerging markets studied differed markedly from that of their developed market counterparts; moving average rules were more profitable when tested using emerging stock market indices. In addition, this profitability persisted for longer moving averages, suggesting that trends in share returns were larger and more persistent in emerging markets.
Original languageEnglish
Pages (from-to)1515-1532
Number of pages18
JournalApplied Financial Economics
Volume18
Issue number19
DOIs
Publication statusPublished - 1 Jan 2008

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Emerging stock markets
Moving average
Emerging markets
Trading strategies
Investors
Profitability
Research agenda
Efficient market hypothesis
Behavioral finance
Profit
Stock market index

Cite this

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The performance of moving average rules in emerging stock markets. / Fifield, S. G. M.; Power, D. M.; Knipe, D. G. S.

In: Applied Financial Economics, Vol. 18, No. 19, 01.01.2008, p. 1515-1532.

Research output: Contribution to journalArticle

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