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Sampling frequency and the performance of different types of technical trading rules

Sampling frequency and the performance of different types of technical trading rules
Sampling frequency and the performance of different types of technical trading rules
The predictive ability of technical trading rules has been studied in great detail however many papers group all technical trading rules together into one basket. We argue that there are two main types of technical trading rules, namely rules based on trend-following and mean reversion. Utilising high-frequency commodity ETF data, we show that mean-reversion based rules perform increasingly better as sampling frequencies increase and that conversely the performance of trend-following rules deteriorate at higher-frequencies. These findings are possibly related to noise created by high-frequency traders.
Commodity ETFs, High-frequency trading, Market efficiency, Technical analysis
1544-6123
136-139
Urquhart, Andrew
ee369df1-95b5-4cdf-bc24-f1be77357c03
Hudson, Robert
60672e7a-4142-4354-9a41-552a3db97157
Mcgroarty, Frank
693a5396-8e01-4d68-8973-d74184c03072
Urquhart, Andrew
ee369df1-95b5-4cdf-bc24-f1be77357c03
Hudson, Robert
60672e7a-4142-4354-9a41-552a3db97157
Mcgroarty, Frank
693a5396-8e01-4d68-8973-d74184c03072

Urquhart, Andrew, Hudson, Robert and Mcgroarty, Frank (2017) Sampling frequency and the performance of different types of technical trading rules. Finance Research Letters, 22, 136-139. (doi:10.1016/j.frl.2016.12.015).

Record type: Article

Abstract

The predictive ability of technical trading rules has been studied in great detail however many papers group all technical trading rules together into one basket. We argue that there are two main types of technical trading rules, namely rules based on trend-following and mean reversion. Utilising high-frequency commodity ETF data, we show that mean-reversion based rules perform increasingly better as sampling frequencies increase and that conversely the performance of trend-following rules deteriorate at higher-frequencies. These findings are possibly related to noise created by high-frequency traders.

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More information

Accepted/In Press date: 28 December 2016
e-pub ahead of print date: 6 January 2017
Keywords: Commodity ETFs, High-frequency trading, Market efficiency, Technical analysis
Organisations: Centre of Excellence for International Banking, Finance & Accounting

Identifiers

Local EPrints ID: 404223
URI: http://eprints.soton.ac.uk/id/eprint/404223
DOI: doi:10.1016/j.frl.2016.12.015
ISSN: 1544-6123
PURE UUID: 3d75fe19-1751-42c7-9241-f07620329063
ORCID for Andrew Urquhart: ORCID iD orcid.org/0000-0001-8834-4243
ORCID for Frank Mcgroarty: ORCID iD orcid.org/0000-0003-2962-0927

Catalogue record

Date deposited: 04 Jan 2017 10:15
Last modified: 16 Mar 2024 04:16

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Contributors

Author: Andrew Urquhart ORCID iD
Author: Robert Hudson
Author: Frank Mcgroarty ORCID iD

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