Market Timing with Moving Averages: The Anatomy and Performance of Trading Rules

ISBN-13: 9783319869728 / Angielski / Miękka / 2018 / 278 str.

Valeriy Zakamulin

Spis treści

Part I: Anatomy of Trading Rules

Synopsis: Uncovers the anatomy of market timing rules based on moving averages of prices

Chapter 1. Introduction

Chapter 2. Moving Averages

Synopsis: This chapter presents all necessary information about different types of moving averages that are used in trading rules

1. Simple Moving Average

2. Linear Moving Average

3. Exponential Moving Average

4. Reverse Exponential Moving Averages

5. Moving Averages of Moving Averages: Double and Triple Exponential Moving Average

Chapter 3. Trading Rules

Synopsis: This chapter introduces different trading rules that are used by practitioners

1. Momentum Rule

2. Price-minus-Moving Average Rule

3. Change of Direction Rule

4. Moving Average Crossover

5. Moving Average Convergence Divergence

Chapter 4. Anatomy of Trading RulesSynopsis: This is the core chapter in the first part of the book. Here I uncover the anatomy of each trading rule coupled with some specific type of a moving average

1. Preliminaries

2. Momentum Rule

3. Price-minus-Moving Average Rule

4. Change of Direction Rule

5. Moving Average Crossover

6. Moving Average Convergence Divergence

Chapter 5. Summary and Conclusions

Synopsis: This chapter summarizes the information from the previous chapter and draws general conclusions

1. Generic Trading Rule

2. Alternative Construction of a Generic Trading Rule

Part II: Performance of Trading Rules

Synopsis: In this part of the book I present the most comprehensive and objective analysis of empirical performance of market timing rules based on moving averages

Chapter 1. Introduction

Chapter 2. Transaction Costs and the Returns to a Trading Strategy

Synopsis: This chapter informs about transaction costs and their impact on the returns to a trading strategy

Chapter 3. Performance measurement of a Trading Strategy

Synopsis: This chapter presents the information about the measurement of the performance of a trading strategy and how to test the hypothesis whether an active trading strategy outperforms the passive strategy

1. Mean returns

2. Risk-adjusted returns: Modigiliani-Modigiliani measure (M2) and Sharpe ratio

3. Statistical tests for outperformance

Chapter 3. Simulation of Trading Strategies

Synopsis: In this chapter I explain how to simulate objectively the returns to a trading strategy

1. In-Sample Simulation of a trading strategy

2. Out-of-Sample Simulation of a trading strategy

2.1 Splitting the total sample in two segments

2.2 Rolling and Expanding window estimation schemes

3. Adaptive approach to selecting a trading rule in out-of-sample tests

Chapter 4. Case Study: Historical Performance of Trading Rules on the S&P Composite Index

Synopsis: This is the core chapter in the second part of the book where I present the most comprehensive analysis of historical empirical performance of different trading rules using the longest historical period of 155 years

1. Data

1.1 Construction of 155 Year Historical Data

1.2 Bull and Bear Cycles in the Stock Market

1.3 Test for Structural Breaks in Data

2. Historical Performance of the Most Typical Trading Rules

2.1 The set of rules

2.2 Time variations in the optimal size of the averaging window

2.2 Performance over Bull and Bear Markets Separately

2.3 Measuring Similarity Between Bull-Bear Markets and Buy-Sell Trading Signals

2.4 Performance over Interchanging Bull and Bear Markets

2.5 Performance over short- to medium-term horizons

3. Historical Performance of Various Weighting Schemes

3.1 Best performing weighting scheme

3.2 Adaptive selection of the best weighting scheme

3.3 Robust weighting scheme

Chapter 5. Case Study: Historical Performance of Trading Rules on Other Financial Indices

Synopsis: In this chapter I briefly evaluate the historical empirical performance of different trading rules using data on a set of different financial indices. The historical data in this chapter are much shorter than in the previous chapter and spans periods of maximum 90 years (beginning from 1926)

1. The set of indices

2. Historical performance of trading rules

Chapter 6. Summary and Conclusions

Synopsis: This final chapter in the second part of the book summaries and draws general conclusion on the historical performance of trading rules based on moving averages

O autorze

Valeriy Zakamulin is Professor of Finance at the School of Business and Law, University of Agder, Norway. He has an M.S. in Business Administration and a PhD in Finance from the Norwegian School of Economics, Norway. He has published articles for various refereed academic and practitioner journals and is a frequent speaker at international conferences. He has also served on the Editorial Board of the Open Economics Journal, Journal of Banking and Finance, and International Journal of Emerging Markets. His current research interests cover behavioral finance, portfolio optimization, time-series analysis of financial data, and stock return and risk predictability.