TY - JOUR
T1 - Performance of technical trading rules
T2 - evidence from the crude oil market
AU - Psaradellis, Ioannis
AU - Laws, Jason
AU - Pantelous, Athanasios
AU - Sermpinis, Georgios
N1 - This work was supported by the EPSRC and ESRC Centre for Doctoral Training on Quantification and Management of Risk & Uncertainty in Complex Systems &
Environments (EP/L015927/1).
PY - 2019/11/22
Y1 - 2019/11/22
N2 - This study investigates the debatable success of technical trading
rules, through the years, on the trending energy market of crude oil. In
particular, the large universe of 7846 trading rules proposed by
Sullivan, Timmermann, and White (1999. “Data-Snooping, Technical Trading
Rule Performance, and the Bootstrap.” The Journal of Finance 54 (5): 1647–1691. doi:10.1111/0022-1082.00163),
divided into five families (filter rules, moving averages, support and
resistance rules, channel breakouts, and on-balance volume averages), is
applied to the daily prices of West Texas Intermediate (WTI) light,
sweet crude oil futures as well as the United States Oil (USO) fund,
from 2006 onwards. We employ the k-familywise error rate (k-FWER) and false discovery rate (FDR) techniques proposed by Romano, J. P., and M. Wolf. (2007. “Control of Generalized Error Rates in Multiple Testing.” The Annals of Statistics 35 (4): 1378–1408. doi:10.1214/009053606000001622)
and Bajgrowicz, P., and O. Scaillet. (2012. “Technical Trading
Revisited: False Discoveries, Persistence Tests, and Transaction Costs.”
Journal of Financial Economics 106 (3): 473–491. doi:10.1016/j.jfineco.2012.06.001)
respectively, accounting for data snooping in order to identify
significantly profitable trading strategies. Our findings explain that
there is no persistent nature in rules performance, contrary to the
in-sample outstanding results, although tiny profits can be achieved in
some periods. Overall, our results seem to be in favor of interim market
inefficiencies.
AB - This study investigates the debatable success of technical trading
rules, through the years, on the trending energy market of crude oil. In
particular, the large universe of 7846 trading rules proposed by
Sullivan, Timmermann, and White (1999. “Data-Snooping, Technical Trading
Rule Performance, and the Bootstrap.” The Journal of Finance 54 (5): 1647–1691. doi:10.1111/0022-1082.00163),
divided into five families (filter rules, moving averages, support and
resistance rules, channel breakouts, and on-balance volume averages), is
applied to the daily prices of West Texas Intermediate (WTI) light,
sweet crude oil futures as well as the United States Oil (USO) fund,
from 2006 onwards. We employ the k-familywise error rate (k-FWER) and false discovery rate (FDR) techniques proposed by Romano, J. P., and M. Wolf. (2007. “Control of Generalized Error Rates in Multiple Testing.” The Annals of Statistics 35 (4): 1378–1408. doi:10.1214/009053606000001622)
and Bajgrowicz, P., and O. Scaillet. (2012. “Technical Trading
Revisited: False Discoveries, Persistence Tests, and Transaction Costs.”
Journal of Financial Economics 106 (3): 473–491. doi:10.1016/j.jfineco.2012.06.001)
respectively, accounting for data snooping in order to identify
significantly profitable trading strategies. Our findings explain that
there is no persistent nature in rules performance, contrary to the
in-sample outstanding results, although tiny profits can be achieved in
some periods. Overall, our results seem to be in favor of interim market
inefficiencies.
KW - Crude oil
KW - Technical trading
KW - Data snooping
KW - Transaction costs
KW - Persistence
KW - Market efficiency
U2 - 10.1080/1351847X.2018.1552172
DO - 10.1080/1351847X.2018.1552172
M3 - Article
SN - 1351-847X
VL - 25
SP - 1793
EP - 1815
JO - European Journal of Finance
JF - European Journal of Finance
IS - 17
ER -