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Performance of moving average trading strategies over varying stock market conditions: the Finnish evidence

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  • Eero P䴤ri
  • Mika Vilska

Abstract

This article examines the profitability of dual moving average crossover (DMAC) trading strategies in the Finnish stock market over the period 1996 to 2012. It contributes to the existing technical analysis literature by comparing for the first time the performance of DMAC trading portfolios of individual stocks to the performance of index trading strategies based on trading on an index that consists of the same stocks. The results show that their relative performance varies over time, whereas previous studies have documented outperformance of index trading strategies over trading strategies of stock portfolios. Moreover, the great majority of 3020 DMAC strategies examined in this article outperform the corresponding buy-and-hold (B and H) strategy for both trading targets (i.e., OMX Helsinki 25 index and individual stocks included in the index) in out-of-sample tests. In addition, the decomposition of the full-sample-period performance into separate bull- and bear-period performance shows clearly that the outperformance of DMAC strategies over B and H strategy is mostly attributable to their better performance during bearish periods.

Suggested Citation

  • Eero P䴤ri & Mika Vilska, 2014. "Performance of moving average trading strategies over varying stock market conditions: the Finnish evidence," Applied Economics, Taylor & Francis Journals, vol. 46(24), pages 2851-2872, August.
    • Handle: RePEc:taf:applec:v:46:y:2014:i:24:p:2851-2872
    DOI: 10.1080/00036846.2014.914145
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