Performance of Moving Average Trading Rules on BSE Sustainability Indices

Vol 10 , Issue 2 , July - December 2023 | Pages: 21-37 | Research Paper

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https://doi.org/10.17492/jpi.mudra.v10i2.1022302

Published Online: December 10, 2023

Author Details ( * ) denotes Corresponding author

1. Sanjeet Sharma, Assistant professor , Commerce , University College of business studies, chaura maidan, shimla, Shimla, Himachal Pradesh, India (Sanjeetsharma1981@gmail.com)

2. * Meenakshi Jaswal, Student, Commerce department , Himachal Pradesh University , Shimla, Himachal Pradesh, India (meenakshi05jaswal@gmail.com)

The Moving Average form of technical analysis is prominent and has been broadly contemplated in the academic literature (Brock et al., 1992).The objective of present study is to investigate the forecasting power of moving average trading rules on the three BSE Sustainability indices by comparing the returns with the traditional buy-and-hold strategy over the period from Jan, 2018 to Nov, 2022. In the present study, five trading rules - [(1, 50), (1,150), (1,200), (2,200), (5,150)], for each index, were evaluated by testing the significance of the results by using statistical t-test. Further also, the performance of the trading rules were analyzed on the basis of four measures- Sharpe Ratio, Ratio (AP/AL), Percentage of profitable trades and Profit Factor. The results of the present study showed that the moving average trading rules consistently underperformed the buy-and-hold strategy even before deducting transaction costs and provides evidence for weak form market efficiency. Traders cannot have excess returns over and above the naïve buy-and-hold strategy by using technical analysis.

Keywords

Buy-and-hold Strategy; Efficiency; Moving Average; Technical Analysis; Transaction Costs

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