Moving average rules, volume and the predictability of security returns with feedforward networks
✍ Scribed by Ramazan Gençay; Thanasis Stengos
- Publisher
- John Wiley and Sons
- Year
- 1998
- Tongue
- English
- Weight
- 156 KB
- Volume
- 17
- Category
- Article
- ISSN
- 0277-6693
No coin nor oath required. For personal study only.
✦ Synopsis
This paper uses the daily Dow Jones Industrial Average Index from 1963 to 1988 to examine the linear and non-linear predictability of stock market returns with some simple technical trading rules. Some evidence of nonlinear predictability in stock market returns is found by using the past buy and sell signals of the moving average rules. In addition, past information on volume improves the forecast accuracy of current returns. The technical trading rules used in this paper are very popular and very simple. The results here suggest that it is worth while to investigate more elaborate rules and the pro®tability of these rules after accounting for transaction costs and brokerage fees.