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Market Timing Investment Methods on the Budapest Stock Exchange

Author

Listed:
  • Attila Zoltan Nagy

    (University of Pecs)

Abstract

A large body of literature confirms that simple investment methods based on timing can outperform and thus be an alternative to traditional investment strategies. The study tests this hypothesis on the Budapest Stock Exchange stock index: a simple timing strategy using 4,619 moving averages was tested on 554,935 trades over the period from 1998 to 2022. The study finds that a wide range of the 4,619 variants performed well on in-sample data, but most could not achieve outperformance out of sample. In some cases, overfitting cannot be ruled out, nor can the effect of randomness due to the low number of cases. The robust variant selected on the in-sample data outperforms out of sample and over the full period at trading costs. However, at a one per cent significance level the Monte Carlo simulation of this variant does not allow the null hypothesis to be rejected, i.e. it cannot be ruled out that randomness or market noise caused the results.

Suggested Citation

  • Attila Zoltan Nagy, 2024. "Market Timing Investment Methods on the Budapest Stock Exchange," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 23(2), pages 105-130.
    • Handle: RePEc:mnb:finrev:v:23:y:2024:i:2:p:105-130
    as

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    File URL: https://en-hitelintezetiszemle.mnb.hu/letoltes/fer-23-2-st4-nagy.pdf
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    References listed on IDEAS

    as
    1. Hendrik Bessembinder & Kalok Chan, 1998. "Market Efficiency and the Returns to Technical Analysis," Financial Management, Financial Management Association, vol. 27(2), Summer.
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    More about this item

    Keywords

    timing; technical analysis; stock markets; BUX index;
    All these keywords.

    JEL classification:

    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies

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