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Can adaption beat hindsight? Evidence from investors’ adapting technical trading rules

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22 March 2017

1:00 - 2:00pm4.04/4.08 Bancroft Building

Speaker name and affiliation

Professor Robert Hudson, Professor of Finance - University of Hull

Specialism

Financial management, corporate finance, international finance, financial derivatives, risk and insurance and risk management.

Seminar title

“Can adaption beat hindsight? Evidence from investors’ adapting technical trading rules”

Abstract

We examine the performance of a hypothetical trader in the Dow (DJIA) who adapts their choice of simple moving average rule parameters over time based on past rules’ performance. We show that adapting the moving average rule over time to incorporate performance information over recent history outperforms both the best static moving average rule chosen with the benefit of hindsight, and the buy and old strategy. Further, we show that returns from following these rules are higher when corporate earnings and stock prices are lower, that they compensate investors for inflation, liquidity, volatility and default risk and persist throughout the sample period.

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