From Σmprirical Finance blog:
A New Anomaly: The Cross-Sectional Profitability of Technical Analysis...MORE
- Yufeng Han, Ke Yang, and Guofu Zhou
- A version of the paper can be found here.
- Live implementation data can be found at Empirical Finance Data™ (Expected Q2 2011)
“In this paper, we document that an application of a moving average strategy of technical analysis to portfolios sorted by volatility generates investment timing portfolios that often outperform the buy-and-hold strategy. For high volatility portfolios, the abnormal returns, relative to the CAPM and the Fama-French three-factor models, are high, and higher than those from the well known momentum strategy. The abnormal returns remain high even after accounting for transaction costs. Although both the moving average and the momentum strategies are trend-following methods, their performances are surprisingly uncorrelated and behave differently over the business cycles, default and liquidity risk.”