Chasing trends: recursive moving average trading rules and internet stocks [An article from: Journal of Empirical Finance]

This digital document is a journal article from Journal of Empirical Finance, published by Elsevier in 2005. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
The recent rise and fall of Internet stock prices has led to popular impressions of a speculative bubble in the Internet sector. We investigate whether investors could have exploited the momentum in Internet stocks using simple moving average (MA) trading rules. We simulate real time technical trading using a recursive trading strategy applied to over 800 moving average rules. Statistical inference takes into account conditional heteroscedasticity and joint dependencies. No evidence of significant trading profits is found. Most Internet stocks behave as random walks; this, combined with high volatility, may be the reason for the dismal performance of the moving average rules.