Part I: Anatomy of Trading Rules Synopsis: Uncovers the anatomy of market timing rules based on moving averages of prices Chapter 1. Introduction Chapter 2. Moving Averages Synopsis: This chapter presents all necessary information about different types of moving averages that are used in trading rules 1. Simple Moving Average 2. Linear Moving Average 3. Exponential Moving Average 4. Reverse Exponential Moving Averages 5. Moving Averages of Moving Averages: Double and Triple Exponential Moving Average Chapter 3.
Trading Rules Synopsis: This chapter introduces different trading rules that are used by practitioners 1. Momentum Rule 2. Price-minus-Moving Average Rule 3. Change of Direction Rule 4. Moving Average Crossover 5. Moving Average Convergence Divergence Chapter 4. Anatomy of Trading RulesSynopsis: This is the core chapter in the first part of the book. Here I uncover the anatomy of each trading rule coupled with some specific type of a moving average 1.
Preliminaries 2. Momentum Rule 3. Price-minus-Moving Average Rule 4. Change of Direction Rule 5. Moving Average Crossover 6. Moving Average Convergence Divergence Chapter 5. Summary and Conclusions Synopsis: This chapter summarizes the information from the previous chapter and draws general conclusions 1. Generic Trading Rule 2.
Alternative Construction of a Generic Trading Rule Part II: Performance of Trading Rules Synopsis: In this part of the book I present the most comprehensive and objective analysis of empirical performance of market timing rules based on moving averages Chapter 1. Introduction Chapter 2. Transaction Costs and the Returns to a Trading Strategy Synopsis: This chapter informs about transaction costs and their impact on the returns to a trading strategy Chapter 3. Performance measurement of a Trading Strategy Synopsis: This chapter presents the information about the measurement of the performance of a trading strategy and how to test the hypothesis whether an active trading strategy outperforms the passive strategy 1. Mean returns 2. Risk-adjusted returns: Modigiliani-Modigiliani measure (M2) and Sharpe ratio 3. Statistical tests for outperformance Chapter 3. Simulation of Trading Strategies Synopsis: In this chapter I explain how to simulate objectively the returns to a trading strategy 1.
In-Sample Simulation of a trading strategy 2. Out-of-Sample Simulation of a trading strategy 2.1 Splitting the total sample in two segments 2.2 Rolling and Expanding window estimation schemes 3. Adaptive approach to selecting a trading rule in out-of-sample tests Chapter 4. Case Study: Historical Performance of Trading Rules on the S&P Composite Index Synopsis: This is the core chapter in the second part of the book where I present the most comprehensive analysis of historical empirical performance of different trading rules using the longest historical period of 155 years 1. Data 1.1 Construction of 155 Year Historical Data 1.
2 Bull and Bear Cycles in the Stock Market 1.3 Test for Structural Breaks in Data 2. Historical Performance of the Most Typical Trading Rules 2.1 The set of rules 2.2 Time variations in the optimal size of the averaging window 2.2 Performance over Bull and Bear Markets Separately 2.3 Measuring Similarity Between Bull-Bear Markets and Buy-Sell Trading Signals 2.4 Performance over Interchanging Bull and Bear Markets 2.
5 Performance over short- to medium-term horizons 3. Historical Performance of Various Weighting Schemes 3.1 Best performing weighting scheme 3.2 Adaptive selection of the best weighting scheme 3.3 Robust weighting scheme Chapter 5. Case Study: Historical Performance of Trading Rules on Other Financial Indices Synopsis: In this chapter I briefly evaluate the historical empirical performance of different trading rules using data on a set of different financial indices. The historical data in this chapter are much shorter than in the previous chapter and spans periods of maximum 90 years (beginning from 1926) 1. The set of indices 2.
Historical performance of trading rules Chapter 6. Summary and Conclusions Synopsis: This final chapter in the second part of the book summaries and draws general conclusion on the historical performance of trading rules based on moving averages.