Abstract

We study the profitability of technical trading rules based on 9 popular technical indicators. To further examine whether investors can design technical trading strategies that can beat the buy-and-hold strategy, we establish 13 trading models based on one indicator, 25 models based on two indicators, and 28 models based on three indicators. The empirical results show that 58 out of 66 models reject the null hypothesis of equality of the mean returns between buy days and sell days. Our findings provide support for the predictive power of technical trading rules. Finally we employ Hansen’s (2005) Superior Predictive Ability to investigate data snooping problem. Overall we observe an inverse association between the number of technical indicator combinations and trading profitability.

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