Can technical oscillators outperform the buy and hold strategy?

This study compares returns from the traditional buy and hold (B&H) strategy to well-known technical oscillators applied to diverse indices leading the global market (DJI, FTSE, NK225 and TA100) during the period 2007-2012. Our aim was to establish whether technical tools can consistently achiev...

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Bibliographic Details
Published in:Applied economics 2015-06, Vol.47 (30), p.3189-3197
Main Authors: Cohen, Gil, Cabiri, Elinor
Format: Article
Language:English
Subjects:
Applied economics
buy and hold
Capital market
Comparative studies
Convergence
Divergence
Indexes
international
Investment policy
Oscillators
Rates of return
Securities markets
technical
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Summary:This study compares returns from the traditional buy and hold (B&H) strategy to well-known technical oscillators applied to diverse indices leading the global market (DJI, FTSE, NK225 and TA100) during the period 2007-2012. Our aim was to establish whether technical tools can consistently achieve returns exceeding those of the B&H strategy across various financial markets. We found the relative strength index (RSI) to be the best oscillator, outperforming the DJIA, the FTSE100 and the NK225 for five of the six years examined. The only index that did better than the RSI was TA100, which outperformed all the examined oscillators. In second place was the moving average convergence/divergence (MACD) oscillator, which outperformed the NK225 B&H strategy and came in second for TA100. The results show that during bear markets the RSI and MACD generally produce better gains than the indices, while the opposite occurs during bull markets.
ISSN:0003-6846
1466-4283
DOI:10.1080/00036846.2015.1013609