Abstract

In this article, we compare a variety of technical trading rules in the context of investing in the S&P500 index. These rules are increasingly popular, both among retail investors and CTAs and similar investment funds. We find that a range of fairly simple rules, including the popular 200-day moving average (MA) trading rule, dominate the long-only, passive investment in the index. In particular, using the latter rule we find that popular stop-loss rules do not add value and that monthly end-of-month investment decision rules are superior to those which trade more frequently: this adds to the growing view that trading can damage your wealth. Finally, we compare the MA rule with a variety of simple fundamental metrics and find the latter far inferior to the technical rules over the last 60 years of investing.

Publication Type:	Article
Additional Information:	The final publication is available at Springer via http://dx.doi.org/10.1057/jam.2013.11
Publisher Keywords:	trend following, S&P500, stop losses, trading frequency, higher moments, fundamental investment metrics
Subjects:	H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Departments:	Bayes Business School > Finance

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