Template-type: ReDIF-Paper 1.0
Author-Name: Chia-Lin Chang
Author-Workplace-Name:
 Department of Applied Economics Department of Finance National Chung Hsing University, Taiwan.
Author-Name: Jukka Ilomäki
Author-Workplace-Name: Faculty of Management University of Tampere, Finland.
Author-Name: Hannu Laurila
Author-Workplace-Name: Faculty of Management University of Tampere, Finland.
Author-Name:
 Michael McAleer
Author-Workplace-Name:
 Department of Quantitative Finance National Tsing Hua University, Taiwan and Econometric Institute Erasmus School of 
	Economics Erasmus University Rotterdam, The Netherlands and Department of Quantitative Economics Complutense University of 
	Madrid, Spain And Institute of Advanced Sciences Yokohama National University, Japan.
Title: Long Run Returns Predictability and Volatility with Moving Averages
Abstract: The paper examines how the size of the rolling window, and the frequency used in moving average (MA) trading strategies, affect financial performance 
	when risk is measured. We use the MA rule for market timing, that is, for when to buy stocks and when to shift to the risk-free rate. The important 
	issue regarding the predictability of returns is assessed. It is found that performance improves, on average, when the rolling window is expanded and 
	the data frequency is low. However, when the size of the rolling window reaches three years, the frequency loses its significance and all frequencies 
	considered produce similar financial performance. Therefore, the results support stock returns predictability in the long run. The procedure takes 
	account of the issues of variable persistence as we use only returns in the analysis. Therefore, we use the performance of MA rules as an instrument 
	for testing returns predictability in financial stock markets.
Classification-JEL: C22, C32, C58, G32.
Keywords: Trading strategies; Risk; Moving average; Market timing; Returns predictability; Volatility; Rolling window; Data frequency.
Length: 34 pages 
Creation-Date: 2018-09
Number: 2018-25
X-File-Ref: http://america.sim.ucm.es/repec/ucm/ref/doicae1825.txt
File-URL: https://eprints.ucm.es/id/eprint/49154/1/1825.pdf
File-Format: Application/pdf
Handle: RePEc:ucm:doicae:1825