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Filter rules: follow the trend or take the contrarian approach?

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  • James Kozyra
  • Camillo Lento

Abstract

This article compares a trending approach to the filter trading rule against a contrarian approach. It is found that, after adjusting for transaction costs, the contrarian approach consistently outperforms the trending approach and is able to earn returns in excess of the buy-and-hold trading strategy. The significance and the robustness of the results are supported by a bootstrap simulation and sub-period analysis, respectively.

Suggested Citation

  • James Kozyra & Camillo Lento, 2011. "Filter rules: follow the trend or take the contrarian approach?," Applied Economics Letters, Taylor & Francis Journals, vol. 18(3), pages 235-237.
    • Handle: RePEc:taf:apeclt:v:18:y:2011:i:3:p:235-237
    DOI: 10.1080/13504851003636164
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    Cited by:

    1. Chen, Kuan-Hau & Su, Xuan-Qi & Lin, Li-Feng & Shih, Yi-Cheng, 2021. "Profitability of moving-average technical analysis over the firm life cycle: Evidence from Taiwan," Pacific-Basin Finance Journal, Elsevier, vol. 69(C).
    2. Perera, Devmali & Białkowski, Jędrzej & Bohl, Martin T., 2022. "Is the tracking error time-varying? Evidence from agricultural ETCs," Research in International Business and Finance, Elsevier, vol. 63(C).
    3. Devmali Perera & Jędrzej Białkowski & Martin T. Bohl, 2022. "Is the Tracking Error Time-Varying? Evidence from Agricultural ETCs," Working Papers in Economics 22/13, University of Canterbury, Department of Economics and Finance.
    4. Gradojevic, Nikola & Gençay, Ramazan, 2013. "Fuzzy logic, trading uncertainty and technical trading," Journal of Banking & Finance, Elsevier, vol. 37(2), pages 578-586.

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