English, Article, Journal or magazine article edition: Spurious Regressions in Technical Trading: Momentum or Contrarian? Mototsugu Shintani; Tomoyoshi Yabu; and Daisuke Nagakura

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Bookmark: http://trove.nla.gov.au/version/35316
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Spurious Regressions in Technical Trading: Momentum or Contrarian?
Author
  • Mototsugu Shintani
  • Tomoyoshi Yabu
  • and Daisuke Nagakura
Physical Description
  • preprint
Notes
  • This paper investigates the spurious effect in forecasting asset returns when signals from technical trading rules are used as predictors. Against economic intuition, the simulation result shows that, even if past information has non predictive power, buy or sell signals based on the difference between the short-period and long-period moving averages of past asset prices can be statistically significant when the forecast horizon is relatively long. The theory implies that both e momentumf and econtrarianf strategies can be falsely supported, while the probability of obtaining each result depends on the type of the test statistics employed. Several modifications to these test statistics are considered for the purpose of avoiding spurious regressions. They are applied to the stock market index and the foreign exchange rate in order to reconsider the predictive power of technical trading rules.
  • Efficient market hypothesis, Nonstationary time series, Random walk, Technical analysis
  • RePEc:ime:imedps:08-e-9
Language
  • English
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