Markowitz meets technical analysis: Building optimal portfolios by exploiting information in trend-following signals

Andre Santos () and Hudson S. Torrent

Finance Research Letters, 2022, vol. 49, issue C

Abstract: Technical indicators are widely used by market participants to identify trends in asset prices and in trading volumes. However, it is unclear how to reconcile this approach with a portfolio selection policy that guide investment decisions in many assets at the same time. We bridge the gap between Markowitz approach to mean–variance portfolios and technical analysis by devising a portfolio strategy in which optimal weights are directly parameterized as a function of multiple trend-following signals. We present an empirical application in which four commonly used technical indicators are employed to obtain portfolios of all constituents of the S&P500 index.

Keywords: Bootstrap; Parametric portfolios; Risk-adjusted performance; Transaction costs (search for similar items in EconPapers)
JEL-codes: B26 C58 G11 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1544612322002963
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:49:y:2022:i:c:s1544612322002963

DOI: 10.1016/j.frl.2022.103063

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().