Predictability of the simple technical trading rules: An out-of-sample test

Jiali Fang*, Ben Jacobsen, Yafeng Qin

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract / Description of output

In a true out-of-sample test based on fresh data we find no evidence that several well-known technical trading strategies predict stock markets over the period of 1987 to 2011. Our test safeguards against sample selection bias, data mining, hindsight bias, and other usual biases that may affect results in our field. We use the exact same technical trading rules that Brock, Lakonishok, and LeBaron (1992) showed to work best in their historical sample. Further analysis shows that this poor out-of-sample performance most likely is not due to the market becoming more efficient - instantaneously or gradually over time - but probably a result of bias.

Original languageEnglish
Pages (from-to)30-45
Number of pages16
JournalReview of Financial Economics
Issue number1
Publication statusPublished - 1 Jan 2014

Keywords / Materials (for Non-textual outputs)

  • Market efficiency
  • Out-of-sample tests
  • Return predictability
  • Technical analysis


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