The performance of moving average rules in emerging stock markets

• Autores: S.G.M. Fifield, D.M. Power, D.G.S. Knipe
• Localización: Applied financial economics, ISSN 0960-3107, Vol. 18, Nº. 19-21, 2008, págs. 1515-1532
• Idioma: inglés
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• Resumen

  • 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.