Profitability of technical stock trading: Has it moved from daily to intraday data, страница 18

[1] For stock market studies see Goldberg and Schulmeister (1988), Brock, Lakonishok, and LeBaron (1992), Hudson, Dempsey, and Keasey (1996), Gunasekarage and Power (2001), Fernandez-Rodriguez, Gonzalez-Martel, Sosvilla-Rivero (2000, 2005), Kwon and Kish (2002), Wong, Manzur, and Chew (2003), Jasic and Wood (2004), Chang, Metghalchi, and Chan (2006). “Abnormal” returns of technical analysis in foreign exchange markets are reported by Schulmeister (1988), Levich and Thomas (1993), Menkhoff and Schlumberger (1995), Gencay and Stengos (1998), Chang and Osler (1999), Neely and Weller (1999), Gencay (1999), LeBaron (1999), Osler (2000), Maillet and Michel (2000), Neely and Weller (2003), Okunev and White (2003), Schulmeister (2008a,b). Excellent surveys of studies on technical analysis are Park and Irwin (2004) for all asset markets and Menkhoff and Taylor (2007) for the foreign exchange market.

[2] Kaufman (1987) provides an excellent treatment of the different methods of technical analysis; other textbooks are Murphy (1986), Pring (1991), Achelis (2001). The increasingly popular “day trading” based on technical models is dealt with in Deel (2000) and Velez and Capra (2000).

[3]                                                                                                                                                       finance                               literature     trend-following                                                                                                                                       approaches                                are         called

                                                                                                                        In   the   behavioral

“momentum strategies”, however, in the remainder of this study they are termed “trend-following” since in the terminology of technical analysis “momentum” refers to a specific type of model which can be trend-following as well as contrarian.

[4] J. Welles Wilder who developed the Relative Strength Index favors a very specific application of this concept, e.g., a time span n of 14 days, an upper bound of 70 and a lower bound of 30 (Kaufman, 1987, p. 97). Later in practice traders have experimented with different time spans as well as different widths of the band (in this study two sizes of the upper and lower bound are tested, as well as 38 different time spans).

[5] When testing the performance of daily trading systems in the S&P 500 futures market, the price at 10 a.m. was used. These price data as well as the 30-minutes-data were extracted from the tick data base provided by the Futures Industry Institute (Washington, D.C.) for 1983/2000 and by ANFutures (http://www.anfutures.com) for 2001/2007.

[6] Institutional traders pay roughly 10$ for a round trip in the S&P 500 market. At an index value of 1000 the value of an S&P 500 futures contract is 250.000$.