The study analyses the performance and price effects of 2,580 technical trading systems in the US and German stock markets.
Technical stock trading is highly profitable when based on 30-minutes data in the stock index futures markets. However, when
trading is based on daily data the profitability of technical models declines significantly. When based on 30-minutes data
technical stock trading is extremely profitable in sample as well as out of sample. The profitability of technical stock trading
is exclusively due to the exploitation of persistent stock price runs. This is reflected by the fact that profitable positions
last on average roughly three times longer than unprofitable positions. A strong feed-back mechanism is operating between
stock price movements and the transactions triggered off by technical models. Rising stock prices, e.g., cause increasingly
more technical models to produce buy signals, which in turn strengthen and lengthen the upward price movement.
Keywords:Technical Trading Systems and Stock Price Dynamics; Technical Trading Systems and Stock Price Dynamics
Forschungsbereich:Industrieökonomie, Innovation und internationaler Wettbewerb