Tests of Technical Trading Rule Profitability in Australian Financial Markets

Abstract

In this paper, we apply the 7,846 technical trading rules considered by Sullivan et al. (1999) to a stock index, some individual stocks, some currencies and some interest rate futures contracts traded in the Australian financial markets. Size distortions due to data-snooping are avoided by using the Reality Check test of White (2000) and the Superior Predictive Ability test of Hansen (2005). We find no evidence that technical trading rules provide trading profits in excess of those available from a simple buy-and-hold strategy.

Keywords: Technical Trading Rules, Trading Strategies, Multiple Comparison, Data Snooping, Australian Financial Markets

JEL Classification: C12, C15, C52, C53